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How to calculate total return

Discussion in 'Strategy Building' started by honghsu, Nov 9, 2002.

1. This is probably the question which has been answered before. But I just can't find the answer from archive. So I would like ask again.

In general how do you calculate your annual total return. Let's assume: deposit \$10,000 at 1/1/2001;
3 trades win \$3000 between 1/1/2001 and 4/1/2001;
2 trades win \$500 between 3/2/2001 and 7/1/2001;
2 trades win \$1,000 between 6/2/2001 and 11/1/2001;
cash \$7,000 at 11/1/2001;

If one has \$13,000 at beginning of the year and \$4,500 gain, then annual total return is 4500/13000 = 34.6%. But this is just too simple to fit real situation.

What is formula you use for real situation? Thanks,

2. You have to link the returns for each period. The way you do it is as follows. Everytime you add money, figure out the return for the prior period, by taking your total capital at the end of the period, and dividing by the beginning of the period. Do this for each new period, and then multiply the returns you got for each period to get your total return. For the example you gave, take the ending capital at 3/31 and divide by beginning capital on 1/1. Then take the ending capital from 6/30 and divide by the beginning capital on 4/1, and continue, in the end, take the reults, multiply them together, subtract 1, and multiply by 100. Done.

3. I really appreciate the help from you!

Thanks again,

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