I see people talking things like "market averages" regarding stockholder growth rates per annum.

I see things like "10% growth rate per annum is avverage in stockholders." I believe this pertains to investors, not traders. In trading, stocks may come and go within a matter of hours, leverage or not.

If I am a trader (like a day trader) trying to capitalize in short-term investments, how would I calculate return rate percentage per annum? Like, say I buy 1 share and sellout for 102% profit same-day -- and say I do 102-140% average over the years. If I trade frequently, how do I calculate yearly return rate?

  • 2
    I want to address the fact that you appear to be expecting to make between 2%-40% profit every day, on average. Even at 2% profit per working day on a 1,000 initial investment equals 1000*(1+.02)^250 = $141,265 at the end of the year. This is a 14,100% return over the year. Do it 2 years in a row, and you'd have $19,956,184. You should temper your expectations with reality. If you think day trading is the way to turn 1k into 20M in 2 years [using the low end of your expected average return], then I feel you are not appropriately assessing the risk associated with your planned activity. – Grade 'Eh' Bacon Mar 2 '17 at 14:07
  • @Grade'Eh'Bacon - I took it as he is providing example returns from individual trades (not returns per day), and from these individual trades how to calculate the annual return. Also, if a trader started with a $1,000 account they would not be trading in the same way if the account grew to $100,000 or $1M or $20M - more likely if they are profitable they would start taking money out (an income) on a regular basis. – Victor Mar 3 '17 at 5:39

You just divide your total profit over your starting capital and multiply it by 100%.

So, for example, if your starting capital is $10,000 and you end the year with $13,000 then you work out your yearly rate of return by:

Yearly profit = $13,000 - $10,000 = $3,000

Yearly returns = $3,000 / $10,000 x 100% = 0.3 x 100% = 30%

But a better way to measure your returns in trading is in terms of your risk R per trade.

For example if your risk for a particular trade is $100 then you would have R = $100. If you make a profit of $200 on the trade you would represent it as +2R. If you make a loss of $100 on another trade you would represent this as -R.

At the end of the year you then tally up all your wins and losses and if you have a positive R value you know that you have a profitable trading system. But more so it will tell you how much gains you are making based on what you are risking.

By looking at trading based on your risk rather than your potential profits, you are better able to manage your risk and keep trading longer.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.