Definition
The average dollar amount of profit or loss generated per unit (shares, contracts, etc.) of the traded asset.
Formula
Return / Size = (Total Return $ on All Trades) / (Total Number of Units Traded)
Examples
Stocks Example
- Total Profit/Loss: $500
- Total Shares Traded: 200
- Return / Size: $500 / 200 = $2.50 per share
Forex Example
- Total Profit/Loss: $300
- Total Lots Traded: 5
- Return / Size: $300 / 5 = $60 per lot
Futures Example
- Total Profit/Loss: -$250
- Total Contracts Traded: 2
- Return / Size: -$250 / 2 = -$125 per contract
Key Points
- Scalability: Helps you assess the potential profit or loss when scaling up or down your trades in terms of shares, contracts, or units.
Considerations
- Unit Size: This metric varies depending on the asset class. Be sure to calculate it using the appropriate units (shares, contracts, lots, etc.) for the market you trade.
