Indicator Overview

The Sharpe Ratio (MSTR) indicator measures Strategy’s risk-adjusted return by calculating the annualised excess return over a risk-free rate (fixed at 3%) divided by the standard deviation of returns, using user-selectable rolling windows (90-day, 180-day, 365-day, or 730-day) with 7-day smoothing applied for clarity. The metric is displayed on the primary axis with a dual-gradient colour scheme, red intensifying for negative values (poor risk-adjusted performance) and bright green intensifying for positive values (strong risk-adjusted performance), while MSTR’s share price is overlaid on a secondary logarithmic axis in white for contextual reference.

How To Use

High and rising Sharpe Ratio values (especially above 1.0–2.0) signal exceptional risk-adjusted outperformance, typically coinciding with aggressive Bitcoin accumulation phases, successful debt raises, and rapid NAV premium expansion, confirming highly efficient bull markets and attractive conditions for holding or increasing exposure. Low or deeply negative values reveal periods when volatility vastly outpaces returns, commonly seen during rising interest rates, forced deleveraging, dilution events, or sharp premium compression, marking cautionary or outright bearish regimes. Divergences are particularly powerful: MSTR price surging to new highs while the Sharpe Ratio weakens or turns negative warns of unsustainable euphoria and impending corrections, whereas price drawdowns accompanied by a rising or stabilising Sharpe Ratio indicate improving efficiency and high-probability rebounds. Traders monitor crosses above zero as regime-shift confirmation into positive risk-adjusted territory, sustained elevated readings for trend validation, and breakdowns below key supports as clear signals to reduce exposure or hedge, making this one of the most effective tools for timing entries, position sizing, and risk management in MSTR’s uniquely leveraged, Bitcoin-correlated equity.