Return on Investment

You will have noticed that, whenever we calculated the ROI for a particular type of trade, we always had to work out the number of shares or contracts involved. When you have done this for a period of months, it will give you the average number you need to either buy or sell (depending on whether you're going long or short) each time you trade.

As part of the ROI calculations, we also had to work out the amount of money you had invested in the market, which we did by multiplying the number of share or contracts by their cost. Over a period of months, this will give you the average amount you could reasonably expect to invest whenever you trade with a particular service.

As part of calculating the gross profit for each type of trade, we multiplied the amount you had outlaid for each trade by the return that each trade generated. That gave us a dollar return per trade. When you calculate these figures over a period of months, a simple average of them will give you the average dollar return per trade.

To calculate our net profit, we had to work out the amount we had paid on brokerage. That gave us a monthly brokerage figure. Dividing that by the average number of trades for that month will give you the average brokerage per trade. Once again, if you calculate that average for a period of months, it will tell you how much you would expect to spend on brokerage.

Tracking the monthly ROI figures over a period of time will allow you to see at a glance what the largest monthly gain for the service was, along with their largest monthly loss. These figures are particularly important when assessing the volatility of a service - a large gap between those two numbers means that you could expect a high degree of volatility.

The ROI also tells you whether the month was a winning month or a losing month. Tabulated over time, they will tell you not only how many months in a year were winners but also how many winning months in total they have had. Converting that into a percentage (by dividing the number of winning months by the total number of months) then gives you their percentage win figure.