ROI
ROI, or Return on Investment, measures how much profit or loss an investment generates relative to the original amount invested.
✦ Key Insight
ROI is one of the simplest ways to evaluate performance. It helps traders compare outcomes across different trades, investments, or strategies. In crypto, where price moves can be large, ROI provides a quick way to measure efficiency and result quality.
✕ Common Misconceptions
One common mistake is focusing on ROI without considering time. A 20% gain in one week is very different from 20% in two years. Another mistake is ignoring risk, leverage, and drawdown. High ROI does not always mean a strategy is healthy or sustainable.
Detailed Explanation
How It Works
The basic formula is:
ROI = (Net Profit / Original Investment) × 100
If you invest $1,000 and your position becomes $1,500, your profit is $500 and your ROI is 50%.
FAQs
Is higher ROI always better?
Not by itself. You should also consider risk and consistency.
Does leverage increase ROI?
It can, but it also increases loss potential.
Why is ROI useful?
Because it gives a simple percentage-based way to compare outcomes.