Return calculation

Return is the profit or loss gained on a trading account over a specific period, expressed as a percentage. The return shows the change in account equity regardless of deposited and withdrawn funds. A positive return indicates a profit, while a negative return indicates a loss.

Formulas

Returns are calculated for periods between balance operations, such as deposits, withdrawals, or internal transfers, as follows:

Return = Equity_end / Equity_start

where:

• Equity_start is the account equity at the beginning of a period, that is, just after a balance operation.

• Equity_end is the account equity at the end of a period, that is, before a balance operation.

Return by periods

The return for several periods is calculated by multiplying the returns for those periods:

Return = Return P1 * Return P2 * Return P3 * … * Return Pn

To express the obtained return ratio as a percentage, the following formula is used:

Return (%) = (Return - 1) * 100

Example

Suppose that a trader creates a master account and deposits $500 to the account.

During the period before the next balance operation, the account equity has increased from $500 to $1,800.

The Period 1 return is calculated as follows:

Equity_start = $500 Equity_end = $1,800

Return P1 = 1,800/500 = 3.6000 Return P1 (%) = (3.6000 - 1) * 100 = 260.00%

The trader makes another deposit of $400. Suppose that during the period before the next balance operation, the account equity has increased by $800.

The Period 2 return is calculated as follows:

Equity_start = $1,800 + $400 = $2,200 Equity_end = $2,200 + $800 = $3,000

Return P2 = 3,000/2,200 = 1.3636 Return P2 (%) = (1.3636 - 1) * 100 = 36.36%

Next, the trader withdraws $500. Suppose that during the period before the next balance operation, the account equity hasn’t changed.

The Period 3 return is calculated as follows:

Equity_start = $3,000 - $500 = $2,500 Equity_end = $2,500

Return P3 = 2,500/2,500 = 1 Return P3 (%) = (1 - 1) * 100 = 0%

The return for three periods is calculated as follows:

Return for three periods = 3.6000 * 1.3636 * 1 = 4.9090 Return for three periods (%) = (4.9090 - 1) * 100 = 3.9090 * 100 = 390.90%

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