Calculation and mechanics
A realized trade result arises when a position is closed in full or in part. In addition, the broker books other amounts to the account, for example dividends, withholding taxes, interest on cash and margin plus fees for securities lending, market data or other account services. These amounts usually do not belong to any single trade.
Total return combines realized P&L and these additional account transactions. Deposits and withdrawals are left out because they change the capital employed but are not an investment return. For dividend-heavy holdings or high financing costs total return can differ considerably from the pure trading result.
Unrealized gains and losses of open positions are part of neither figure. They do affect the current account value, the net liquidation value.
Total return = realized P&L + dividends - withholding taxes + interest earned - interest paid - fees
Distinction
Trading metrics such as win rate, Profit factor and Expectancy are based on the results of individual closed trades. Total return extends this view by additional income and costs at account level. It is not the complete gain or loss of the account, though, as long as open positions are not included.
CAGR converts the development over a period into a yearly rate. Its result depends on which result figure and which capital employed the calculation is based on.
Related terms
- Base currency (Reporting currency)
- CAGR (Compound annual growth rate)
- Expectancy (Average result per trade, expected value)
- Max drawdown (Maximum drawdown, MDD, time in drawdown)
All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.