How to calculate return - Aussie Stock Forums

# Thread: How to calculate return

1. ## How to calculate return

when refer to their annual compounded return as 30% p.a, does this factor in the leverage multiple as well.

ie. if one is trading a leverage instrument, say a full contract futures that has an initial (intrday / overnight) margin component as well as a maintence margin compement, total a 3:1 debt/equity ratio. And they achieve a 30% return for the year using that trading that instrument :

- does that really mean a 90% return on equity (30% x 3)?

- or is the return on equity 30% (and on the instrument actually 10%)

I am just curious to see how people calc this?

Also, say for instance some has a 100K in their trading account but they only touched about 50K to trade with. If they say they achieved a 20% return, are they basing it on the 50K or are they referring to the 100K?

just curious, thank s

2. ## Re: How to calculate return

Start year with 400,000 equity
End year with 562,000

Return on equity = (562000/400000)-1
= 40%

3. ## Re: How to calculate return

Originally Posted by beamstas
Start year with 400,000 equity
End year with 562,000

Return on equity = (562000/400000)-1
= 40%
thanks beamstas

so whether its 3:1 or 40:1 leverage that was applied to the 40% trading year, then that's already factored into that 40% return?

cheers

4. ## Re: How to calculate return

thanks beamstas

so whether its 3:1 or 40:1 leverage that was applied to the 40% trading year, then that's already factored into that 40% return?

cheers
Not sure what leverage as i never really know the price of the total shares.. just my margin

But i disregard everything

Just calculate the money i actually recieved

5. ## Re: How to calculate return

Return is the return for the capital under management.

Also, say for instance some has a 100K in their trading account but they only touched about 50K to trade with. If they say they achieved a 20% return, are they basing it on the 50K or are they referring to the 100K?
The return would be on 100k. How much they touched or risked is irrelevant; what matters is how much they were prepared to risk, and in this case it's 100k.

6. ## Re: How to calculate return

Don't worry about return on margin. Worry about learning how to trade. you will exceed all benchmarks you have ever dreamed of,

7. ## Re: How to calculate return

Originally Posted by Trembling Hand
Don't worry about return on margin. Worry about learning how to trade. you will exceed all benchmarks you have ever dreamed of,
You're a freak TH

8. ## Re: How to calculate return

ST, calculate it in whatever way is meaningful and significant for you, but only compare apples with apples ie. compare your returns to say, some hedge fund, only if you're using the same measures.

I use a number of different ways depending on what and why I'm assessing certain stats.

But at the end of the day what's important is maintaining consistency in how and why you measure a given way so that you can track excessive drawdown/growth etc to keep an eye on appropriate risk levels, strategy outcomes and potentially detrimental variance. ie. you could be losing touch with the market and need to pull back, reassess and refocus.

Ps. Well done as usual, TH.

9. ## Re: How to calculate return

Originally Posted by Trembling Hand
Don't worry about return on margin. Worry about learning how to trade. you will exceed all benchmarks you have ever dreamed of,
looks like CMC's fees will be on the rise again soon !! ---

10. ## Re: How to calculate return

How do you calculate expectancy as a percentage?

I know how to get to tick/\$ expectancy per trade, but stumped when trying to turn that into a percentage. Anyone know? (lol its been a long day and brain juice has run out)

11. ## Re: How to calculate return

isnt it as follows?

= \$expentancy (x)

x = \$expectancy
y = risk per trade (ie. 2% of 50,000 account, \$1000 would be y)
z = %expectancy (x/y)

lets plug numbers into an example (applying same %risk and same trading account as above):

(\$125 x 52%) - (\$100 - 48%) = \$17
x = \$17
y = \$1,000
z = 1.7% (\$17/\$1,000)

therefore every trade you make you can expect an average return on risk of 1.7%

can someone correct me if i am wrong?

12. ## Re: How to calculate return

(\$125 x 52%) - (\$100 - 48%) = \$17
x = \$17
y = \$1,000
z = 1.7% (\$17/\$1,000)

therefore every trade you make you can expect an average return on risk of 1.7%

can someone correct me if i am wrong?

Isnt that 1.7% just alpha? (risk adjusted return)

Im looking for something that looks like "52%", where anything above 50% is a positive expectancy.

13. ## Re: How to calculate return

Originally Posted by Naked shorts
Isnt that 1.7% just alpha? (risk adjusted return)

Im looking for something that looks like "52%", where anything above 50% is a positive expectancy.
\$17 = expectancy expressed as dollar
1.7% = expectancy, same figure expressed as a percentage

what i think you are making reference to is %W (your percetange of winners based on the number of trades taken)

sticking with my example for simplicity.

winning trades = 260 (52%, 260/500)

total \$ amount of winning trades = \$32,500
total \$ amount of losing trades = \$24,000

based on the figures in my example:
{(\$125 x 52%) - (\$100 - 48%) = \$17}

is this what you were after?

14. ## Re: How to calculate return

\$17 = expectancy expressed as dollar
1.7% = expectancy, same figure expressed as a percentage

what i think you are making reference to is %W (your percetange of winners based on the number of trades taken)

sticking with my example for simplicity.

winning trades = 260 (52%, 260/500)

total \$ amount of winning trades = \$32,500
total \$ amount of losing trades = \$24,000

based on the figures in my example:
{(\$125 x 52%) - (\$100 - 48%) = \$17}

is this what you were after?
Nah I know what your getting at but it isnt it. I'll do some digging and post it here.

15. ## Re: How to calculate return

Originally Posted by Trembling Hand
Don't worry about return on margin. Worry about learning how to trade. you will exceed all benchmarks you have ever dreamed of,
So you started the day with \$22533
and ended the day with \$22536.11

Quiet day.

16. ## Re: How to calculate return

Originally Posted by tech/a
So you started the day with \$22533
and ended the day with \$22536.11

Quiet day.
??

decimals Tech ?? (stirrer)

ps my sympathies with the shingles --- have an older mate who suffered with them pretty badly for a while --- hes right now though, so just a matter of hanging in there !!

i'm most concerned about TH putting these bucket shops out of business (and im not joking) --- some of us poorer b@stards rely on them to make a few bucks !! ----- inspirational stuff though ---- (practice... review ..etc etc ... lol )

17. ## Re: How to calculate return

whats a bucket shop?

18. ## Re: How to calculate return

whats a bucket shop?
Bunnings

19. ## Re: How to calculate return

Originally Posted by tech/a
Bunnings

20. ## Re: How to calculate return

ha,

tech, i dont care what they say about you on these forums. You're alright kid ...you're alright.

#### Posting Permissions

• You may not post new threads
• You may not post replies
• You may not post attachments
• You may not edit your posts
•
Aussie Stock Forums