Profitability is computed using the following formula:
- P means “profitability in %”
- E_begin_X means “funds available at the beginning of the period X”.
- E_end_X means “funds available at the end of the period X”.
- N means “the latest settlement period”.
Rollover marks the end of a trading period and the beginning of another trading period.
The formula defines profitability in % from the the moment of registering an account.
A trader’s profitability depends only on the results of his/her trading operations.
Deposits and withdrawals have no influence on account profitability rates.
This has to be taken into consideration when an account balance changes due to balance operations.
Example of Profitability calculation
Here’s an example.
Let’s assume a deposit of $500 is made into a trader’s account.
Some time later, the deposit becomes reduced to $100 following unsuccessful transactions, which is 80% less.
This is displayed in the ranking.
To return the profitability rate to a break-even level, the trader needs to increase the capital fivefold (from $100 to $500) by showing positive performance.
The trader decides to top up the account to exit the drawdown in a more comfortable way and pays $50.
The aggregate deposit becomes equal to $150.
However, the account profitability remains unchanged at -80%.
Let’s assume then that the account deposit becomes equal to the initial one, $500, as a result of profitable transactions carried out in the account.
Profitability = ((100/500*500/150)-1)*100 = 33.33%
Note that this fivefold deposit increase didn’t make the account exit the drawdown: since the trader has made the additional deposit of $50, the aggregate amount of $150 was to have been increased fivefold.
It means that in order to exit the drawdown, the trader needs to increase the account deposit to $750,
.e. a trading profit of $250 is still required for exiting the drawdown.
Profitability = ((100/500*750/150)-1)*100 = 0%