I'm looking for a formula to calculate my over all return based on N trades and avg return per trade (R).

Let's say:

My average return per trade (R) is 5% and the number of trades (N) made are 100.

What is my total return if my initial investment was $1000 and I only bought and sold 1 asset at a time at reinvested my profit + my initial $1000 after each sell and how can I easily calculate that based on N & R?

This question may seem odd, the reason I have to do it this way is because the only values I have access too are N and R, not the actual portfolio value in $, which would make it a whole lot easier.



If you get 5% return per trade you'll get

1.05^100 = 131.50

So if you start with 1,000 you'll have

$1,000 * 131.50 = $131,500.
  • 1.05 being the 5%? 1.01 if lets say my avg return is 1%? tot the power of my total number of trades?
    – Crashtor
    Dec 21 '18 at 22:28
  • That's correct. A rule of thumb is to double your investment you need the return times the number of trades to be 70. So 10% return will double in 7 trades. 5% return will double in 14 trades, roughly. You can use that to make a ballpark estimate to see if your math is correct. In this case, 100 / 14 is about 7, and 2 to the 7th is 128, which is very close to the 131 that it actually is.
    – corsiKa
    Dec 21 '18 at 23:48
  • That's a brilliant rule of thumb. Thank you so much. An additional question would be, how to calculate the same thing given my average return per trade is negative? Do I just do -0.05 * N trades then?
    – Crashtor
    Dec 21 '18 at 23:56
  • If you lose 5% per trade, then you take 0.95 ^ N
    – corsiKa
    Dec 22 '18 at 0:00
  • @Crashtor but remember that's only an estimate. Consider losing 2% and 8% on two trades is an average of 5% loss. It's actually 90.16% original left, but with the .95^2 estimate there's 90.25% left. That error adds up a lot over hundreds of trades.
    – corsiKa
    Dec 22 '18 at 0:02

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