# How to calculate average return?

359
APeng
Hi guys

I got a simple question: How to calculate your average return?

Given is

ratio of successful trades (ratio):        60%

risk / reward ratio (R)                         2

My try:            ratio x risk  x R – (1-ratio) x risk

0.6    x 0.05 x 2 – (1-0.6)   x 0.05 = 0.04 = 4%

Am I right?

Moderator
10652

APeng:
Hi guys

I got a simple question: How to calculate your average return?

Given is

ratio of successful trades (ratio):        60%

risk / reward ratio (R)                         2

My try:            ratio x risk  x R – (1-ratio) x risk

0.6    x 0.05 x 2 – (1-0.6)   x 0.05 = 0.04 = 4%

Am I right?

No.

Those figures would give an average loss

Out of 100 trades you would have 60 winners

risk / reward ratio (R):   2 and risk at 5% means that each winning trade would return 2.5%

Total winnings= 60 x 2.5 = 150

The 40 losers, all losing 5% would result

Total Losses-= 40 x 5 = 200

Net result over the 100 trades would be

150 - 200 = -50

So average per trade will be

-50/100 = -0.5%

359
APeng
GumRai:

No.

Those figures would give an average loss

Out of 100 trades you would have 60 winners

risk / reward ratio (R):   2 and risk at 5% means that each winning trade would return 2.5%

Total winnings= 60 x 2.5 = 150

The 40 losers, all losing 5% would result

Total Losses-= 40 x 5 = 200

Net result over the 100 trades would be

150 - 200 = -50

So average per trade will be

-50/100 = -0.5%

Thank you for your answer. I meant with a risk / reward ratio that brings a profit that doubles a loss. So, to be mathematically correct, a win / loss ratio of 0.5.

Out of 100 trades you would have 60 winners

risk / reward ratio (R):   0.5 and risk at 5% means that each winning trade would return 10%

Total winnings= 60 x 10% = 600%

The 40 losers, all losing 5% would result

Total Losses-= 40 x 5% = 200%

Net result over the 100 trades would be

600% - 200% = 400%

So average per trade will be

400% / 100 = 4%