How do you calculate your return if you sell a currency and buy back later

[xelite777]

1245, you just said and I quote :
"Capital end of month - Capital begin of month = P&L (Assuming no additions or subtractions in capital). Then P&L/Capital begin of month = return on capital for that month"

So in my previous example you said I made a 100% yearly return on investment but if we follow your calculations I made only 10% (P&L/Capital begin of year = return on capital for that year)!

So obviously we do have a problem here...

 

[1245]

1245, you just said and I quote :
"Capital end of month - Capital begin of month = P&L (Assuming no additions or subtractions in capital). Then P&L/Capital begin of month = return on capital for that month"

So in my previous example you said I made a 100% yearly return on investment but if we follow your calculations I made only 10% (P&L/Capital begin of year = return on capital for that year)!

So obviously we do have a problem here...

I don't see the problem. If you would like me to call you, PM me your phone number. I think the issue is you are looking at your return per trade with no unused capital. Your returns are calculated at account level.

 

[newwurldmn]

1245, you just said and I quote :
"Capital end of month - Capital begin of month = P&L (Assuming no additions or subtractions in capital). Then P&L/Capital begin of month = return on capital for that month"

So in my previous example you said I made a 100% yearly return on investment but if we follow your calculations I made only 10% (P&L/Capital begin of year = return on capital for that year)!

So obviously we do have a problem here...

You changed the scenario.
In the first scenario you implied you had a 1000 account and grew it to a 2000 account: for a return of 100%
In the second scenario you said that you had a 10,000 account and grew that by 1000 by doing a trade that required 1000 margin: for a return of 10%

In the first scenario you used all of your account to fund the margin requirement on the trade. In the second scenario you used only 10% of your account to fund the margin on the trade.

 

[xelite777]

In the first scenario you used all of your account to fund the margin requirement on the trade. In the second scenario you used only 10% of your account to fund the margin on the trade.

No, I did not change anything, in the second "scenario" I simply gave the reader some extra information, that I had $10,000 in my trading account when I initiated the trade.

I asked the same question in different trading forums and the answer is always the same : tell people you turned $1,000 into $2,000 and they will say it's a 100% return on investment (once again that $1,000 is only margin money).

But tell them that you had $10,000 in your trading account when you initiated the position and now they will tell you : "Hey, wait a minute, that's a 10% return on investment, not 100%"

The fact is, some (most?) traders have no clue on how to calculate that return on investment, especially with leveraged financial instruments like the futures or the Forex.

 

[newwurldmn]

No, I did not change anything, in the second "scenario" I simply gave the reader some extra information, that I had $10,000 in my trading account when I initiated the trade.

I asked the same question in different trading forums and the answer is always the same : tell people you turned $1,000 into $2,000 and they will say it's a 100% return on investment (once again that $1,000 is only margin money).

But tell them that you had $10,000 in your trading account when you initiated the position and now they will tell you : "Hey, wait a minute, that's a 10% return on investment, not 100%"

The fact is, some (most?) traders have no clue on how to calculate that return on investment, especially with leveraged financial instruments like the futures or the Forex.

So you bought one share of twtr yesterday. I bought 1000. Our return is the same?

The only firms that follow your mehdology are private equity firms that can't guarantee they can deploy all their capital and use the methodology to pad their returns.

It's not an intellectually honest way to calculate your returns.

Further: one Es option produces a higher return than 500 spy despite having the same risk profile. It doesn't make sense.