23. How is the Growth in Signals Calculated?The growth shows how the balance of an account grows. It is calculated so that the influence of deposits and withdrawals is avoided.The entire trade history of an account is divided into periods between balance operations (deposits and withdrawals). First, the total growth coefficient (K) is calculated by multiplying the growth coefficients computed for each period between the balance operations (BO) and then the growth in percentage terms is calculated.
On the chart below, the balance operations are marked with big red dots and the dashed lines indicate the periods of growth calculation:
In this case, the total growth for the account is calculated as follows:
Despite the current balance is about 50% higher than the initial deposit, the real growth due to trade operations is only 10%.
24. How is the year-to-date growth (YTD) calculated, if a sum of monthly growths differs from this value?
We use a compound rate when calculating YTD. This means that the YTD rate is calculated not by a simple addition of growth for several periods of time, but by their multiplication. Every period growth is superimposed on total cumulative growth of previous periods. This can be shown by an example.
In 2014 the signal had following monthly growth values:
The growth ratio for the period is calculated according to the formula: (Growth in percentage terms) / 100% + 1.0. The growth ratio in January = (14.71%/100%)+1.0 = 1.1471.
You have to multiply together growth ratios of January and February of 2014 and get the general growth ratio for these months to calculate the growth for the period.
Total growth ratio = 1.1471 * 1.2051 = 1.3823
The total growth ratio helps us get the ratio in percentage terms as (Total growth ratio - 1) * 100% = Growth for the period
Growth for January-February of 2013 in percentage terms = (1.3823 - 1.0) * 100% = 38.23%
As you can see, there was 38.23% growth in these two months. And it differs greatly from simple addition of percents for every month ( 38.23% != 14.71% + 20.15%)
So if you want to get a year growth ratio, you need to multiply together growth ratios for each month, then subtract 1.0 from the product and multiply the result by 100%. This will be the compound year-to-date rate (YTD).
You need to do the same with annual growth values to see the growth for all years of trading.