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Return on Equity (RoE) and How It's Calculated
Return on Equity (ROE) is an indicator that reflects the performance of a trade. Positive ROE means that the trade is profitable while negative ROE means that the trade is currently at a loss.
Return on Equity (ROE or ROI), is an indicator which reflects the current NET performance of an open trade.
- Positive ROE means that the trade is currently profitable
- Negative ROE means that the trade is currently at a net loss currently
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ROE is calculated based on the trader’s margin reserved for a trade, using the following formula:
- ROE% = (Unrealized PnL + Realized PnL - CloseOrderCommission) / Margin
For example, if a trader has used $100 as Margin for a position, a ROE value of +20% will mean that the trade is essentially at a net profit of $20.
ROE always takes into account not only the flat PnL from the price movement of the asset being traded - but also any associated trade fees and funding.
When initially opening a position, the ROE% indicator will show a negative value. This is due to the ROE% indicator taking into account the opening and closing trade fees which are incurred for the position.
This provides traders with a fully transparent and precise ROE indicator.