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The return between two price points can be calculated as Price(present)/Price(previous) -1

Or, it can be expressed as exp(log(Price(present)/Price(previous)) -1 So, I am calculating the return for each new price like the fig shown below.

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However, My confusion is with calculating return for each price point for multiple buy/sell/hold positions, as shown in example below

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I have two questions?

  1. I think the total return for the scenario above is (10/3 - 1) *100 + (7/6 -1)*100 = 250 % am I correct with that number?
  2. I came across a scenario where the return was calculated like the figure shown below, is this method correct ? if yes, can you explain, if no, can you provide the correct way to calculate ?

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  • $\begingroup$ You need to consider how many shares you buy. If you bought 100 shares in period 1 then you have 700 dollars available when you sell in period 2. In period 5 what are you going to do: (1) buy another 100 shares again (2) reinvest the entire 700 you have available, which means you will buy 700/3 = 233 shares (3) buy a different amount of shares (determined how?). Without knowing such details the answer is undetermined. $\endgroup$
    – nbbo2
    Dec 5, 2021 at 21:02
  • $\begingroup$ @noob2 when the return was calculated for a single buy and sell over a period, the number of shares was not needed, for the return percent which was calculated as 66.67%, then why would the number of shares be needed to calculated for multiple buy and return ? However if the number is absolutely needed, I would like to calculate on buying and selling 1 unit share. $\endgroup$
    – isnvi23h4
    Dec 6, 2021 at 6:30
  • $\begingroup$ If the quantity is always the same, then you can create (e.g. in Excel) a Wealth Index which starts at 1. When you have a position it grows by the same percentage as the stock price, when you don't have a position it stays constant. (You can use a column of 1s and 0s to show when you have a position at start of day and when you don't). At the end (Wealth Index - 1) is the return on your overall trading strategy. $\endgroup$
    – nbbo2
    Dec 6, 2021 at 10:16

1 Answer 1

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The return for each price point on multiple buy and sell can be calculated with the following formula shown below.

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