Sharpe and Sortino are both reward-per-risk ratios, and both turn a series of returns into a single number you can compare across strategies. They differ in one respect: what they count as risk. That difference is small in arithmetic and large in consequence, and a trader who quotes one without understanding the other can be flattered into trusting a strategy they should question.
What Sharpe measures
Sharpe divides a strategy's excess return by the volatility of all its returns — up moves and down moves alike. Its assumption is that variability itself is the risk. A strategy with sharp upside swings is penalised the same as one with sharp downside swings, because both add to the volatility in the denominator. That is sometimes fair and sometimes harsh.
What Sortino changes
Sortino keeps the same idea but counts only downside volatility — the moves below a target, usually zero. Upside swings no longer count against the strategy. The reasoning is intuitive: a trader does not lose sleep over a violently good day. By ignoring upside variance, Sortino tends to produce a higher number than Sharpe for the same return series.
Where Sortino can flatter
That higher number is precisely the trap. A strategy with rare, enormous gains and a steady drip of small losses can post a handsome Sortino while still being fragile — the upside it is rewarded for may depend on a handful of outlier days that will not repeat. Sortino measures less, so it hides more. It is a useful lens, not a better one.
Read them alongside drawdown
Neither ratio describes the worst moment you would have lived through. Two strategies can share a Sortino and differ enormously in their deepest drawdown. That is why a single ratio is never enough: read reward-per-risk and peak-to-trough pain together, and demand both hold up out-of-sample rather than on one tuned window.
For the broader pattern of metrics that flatter a strategy into looking ready, see backtesting myths that cost money, and learn how to spot overfitting in a strategy before either ratio convinces you. A strong ratio is permission to investigate further, never to go live.