How to calculate ROI on trades?

    Quick Answer

    ROI = ((Selling Price - Buying Price) ÷ Buying Price) × 100%.

    Detailed Explanation

    Return on Investment (ROI) measures the profitability of a trade as a percentage. The basic formula is: ROI = (Net Profit ÷ Cost of Investment) × 100. For trades, this means (Selling Price - Buying Price - Fees) ÷ Buying Price × 100. This allows comparison of returns across different position sizes and helps evaluate trading performance.

    Key Points

    • 1ROI = (Gain - Cost) ÷ Cost × 100
    • 2Include all fees in calculation
    • 3Percentage allows fair comparison
    • 4Annualize for long-term trades
    • 5Compare to risk-free rate

    Example

    Buy 100 shares at $50 ($5,000), sell at $60 ($6,000), $10 commission. ROI = ($990 ÷ $5,000) × 100 = 19.8%.

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