How to calculate average return?
Hi guys
I got a simple question: How to calculate your average return?
Given is
ratio of successful trades (ratio): 60%
risk per trade (risk): 5%
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%
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%
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I got a simple question: How to calculate your average return?
Given is
ratio of successful trades (ratio): 60%
risk per trade (risk): 5%
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?