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Definition
The average percentage profit or loss generated per trade over a specified period.
Formulas
- Stocks: Avg % Return = (Sum of % Returns on All Trades) / (Total Number of Trades)
- Forex: Avg % Return = (Sum of % Returns on All Trades) / (Total Number of Trades)
Example
Stocks Example
- Trade 1: Investment of $1000, Profit of $200 => 20% return
- Trade 2: Investment of $500, Loss of $50 => -10% return
- Trade 3: Investment of $2000, Profit of $100 => 5% return
- Avg % Return: (20% – 10% + 5%) / 3 = 5%
Forex Example
- Account Balance: $5000
- Trade 1: Profit of $250 => 5% return
- Trade 2: Loss of $100 => -2% return
- Trade 3: Profit of $150 => 3% return
- Avg % Return: (5% – 2% + 3%) /3 = 2%
Key Points
- Overall Performance: Provides a general picture of your average percentage-based performance per trade.
Considerations
- Investment vs. Account Balance: The percentage return calculation differs for traditional investments vs. forex trading:
- Traditional Investments: Percentage return is calculated based on the trade’s specific investment.
- Forex: Percentage return is calculated based on the overall account balance before the trade took place.
