Free trading tools
Deflated Sharpe calculator
Every parameter combination you tried raises the bar your Sharpe has to clear. Enter your backtest and the number of attempts — get the bar, and whether you cleared it.
Your backtest
The headline Sharpe your backtest reports.
Calendar days the backtest covers — with the timeframe this sets the number of return observations.
Every variation you ran before picking this one — parameter tweaks, indicator swaps, timeframe changes. Be honest; this is the whole point.
Advanced (return distribution)
0 if unknown.
3 = Gaussian. Fat-tailed crypto returns are often 5–10.
The honest read
Probabilistic Sharpe (vs 0)
Probability the true Sharpe is above zero, ignoring how many tries it took.
99.4%
The luck bar after 20 tries
The annualized Sharpe the single best of 20 zero-skill attempts would show by chance alone. Your Sharpe competes against this, not against zero.
1.35
Deflated Sharpe (vs the luck bar)
Probability your result beats what pure luck would have produced across all your attempts.
73.8%
p-value
0.262
Your Sharpe is above the luck bar, but not convincingly. With this many attempts, a result like this is roughly as consistent with luck as with skill. More data or fewer retries would sharpen the answer.
The deflated Sharpe ratio (Bailey & López de Prado, 2014) answers one question: given how many strategy variations you tried, is the best one's Sharpe better than the best of an equal number of zero-skill attempts? Each extra trial raises the expected maximum Sharpe of pure luck — the "luck bar". Your number only means something if it clears that bar on enough data. This calculator uses the standard zero-skill null (trial Sharpes dispersed by estimation noise) and adjusts for non-normal returns via skewness and kurtosis.
Intuition: flip 30 coins ten times each and the best coin will look 'skilled'. Try 30 strategy configs and the best backtest will look profitable. Deflation asks whether it looks MORE profitable than the best coin.
We measured this on 11,440 real backtests — read the curve-fitting study →
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