According to Teddy, the Sharpe Ratio is a crucial indicator that measures beyond price action. It also shows whether the market is delivering enough return for the volatility behind the move, making it important for a phase filter, not as a trigger. When the ratio travels deep into positive territory, the move is typically considered mature, and the reward is already getting stretched.
However, those are often late-trend or overheated phases. In the opposite scenario, where the metric falls deep into negative territory, the market is moving through pain, and this is not an efficient trend. This is due to the fact that reset phases and better long-term entry conditions usually form here.
During the late period, the metric expanded to about 2.072 on January 30, 2025, with XRP sitting near $3.14, marking an overhead phase, where reward had already been stretched. Meanwhile, the right is currently positioned far below that peak and still below zero (0).
Momentum Indicators Show Compression
