What is ROI in Trading?

Return on Investment (ROI) measures the gain or loss generated relative to the amount initially invested. It is commonly used to assess the percentage return from an investment or trade. 

How to Calculate ROI in the Stock Market?

Generally, the following ROI Formula is used:

• ROI=Final Value  – Initial InvestmentInitial Investment100

For example, suppose ₹50,000 is invested in a stock, and the investment is later worth ₹60,000. Now, the ROI would be:

• ROI=₹60,000  – ₹50,000₹50,000100 = 20%

Thus, the ROI is 20%, before considering brokerage, taxes, and other applicable costs.

To determine ROI in trading, the calculation can be applied to an individual trade, a portfolio, or a specified investment period. 

However, ROI does not account for the length of time by itself. A 20% return over six months and a 20% return over five years may have different annualised performance characteristics.

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