% Gains - Is My Math Correct

Discussion in 'Risk Management' started by ps0013, Oct 19, 2024.

  1. ps0013

    ps0013

    Since April 2024

    Deposits $ 154,000
    Withdraws $ 6,000
    Trading $ 18,371
    Balance $ 166,371

    Profit $ 18,371
    + 11.93%

    Am I missing anything or is +11.93% correct.


    Thanks
     
  2. Peter8519

    Peter8519

    Since I am facing some uncertainty on this too. Here is my thought.
    1. Calculate the annualize figure using simple ratio
    2. Track the numbers of days(from entry to exit) in each trade and annualize it.
     
  3. Overnight

    Overnight

    TurboTax (or a CPA) is your friend.
     
  4. BMK

    BMK

    TurboTax is not going to provide the kind of data the OP is asking about.

    Can't answer that.

    18,371.00 is indeed 11.93% of 154,000.00.

    But those numbers are not enough information to determine your rate of return for a particular period of time.

    It makes a big difference when you deposited funds and when you withdrew funds. And it matters when you closed each transaction.

    If you deposited $154,000 in April, and you did not withdraw the $6,000 until a few weeks ago, then your rate of return is probably pretty close to 11.93%.

    But if you only deposited $14,000 in April, and then you deposited $70,000 in late May, and another $70,000 in early July, then your rate of return is probably quite a bit higher, because you probably made a significant portion of your gains at a time when you had less capital in the account.

    There is more than one way to calculate total return for a given period of time. All of them attempt to account for these variables in one way or another.

    If you start your account with $10,000 on Jan. 1 and then it is worth $11,000 on Dec. 31, and you never added any money or took any money out during the year, then, yeah, your rate return is 10%.

    But if you added any money or took any money out, at any time during the year, then the calculations get really complicated really fast.
     
    Actuarial_Fun and ps0013 like this.
  5. taojaxx

    taojaxx

    You need to use Time Weighted Rate of Return to account for the moment your inflows outflows occurred. IBKR states your performance using TWRR. So should your broker.
    Else you can do the math yourself by computing the return for each sub-period between inflows and outflows and compound those returns. Tedious, but doable.
    Investopedia is your friend: https://www.investopedia.com/terms/t/time-weightedror.asp
     
    ps0013 likes this.
  6. ironchef

    ironchef

    Your brokerage will and should give you their standard way to calculate profit, which is most likely as @taojaxx said
     
    ps0013 likes this.
  7. mervyn

    mervyn

    does it matter?
     

  8. How much capital was in the trade?
     
    Last edited: Oct 20, 2024
  9. It's the most conservative way of doing it, assuming the withdrawal was recently. The biggest issue is that your annualized return would be over 2x your profit, since you have only traded 6 months (assuming you are trying to express an annualized %)
     
    ps0013 likes this.
  10. maxinger

    maxinger


    It doesn't matter how you calculate as long as

    - you are not sitting for an examination

    - you are withdrawing $$$ from your trading account.
     
    #10     Oct 21, 2024
    ps0013 likes this.