How to calculate the ROI for the Netswap system

The advent of the internet and various improvements in technology throughout the years brought substantial changes in the financial industry and the way to trade the markets. Yet, the ultimate goal of every trader is still the same: generating the highest relative return in the shortest period of time.

In this article we will talk about all the factors that influence the Return on Investment (ROI) when trading through the Netswap system and how to calculate it in the case that our Trade size calculation service is used.

What does affect the ROI?

The Return On Investment over a given period is affected by the following factors:*

• Net swap: the higher is the positive difference between the Swap values and the higher the ROI.
• Position size: the higher is the size of the trades and the higher the ROI.
• Spreads/Commissions: the lower are the spreads of the pair traded and the commissions of the brokers and the higher the ROI.
• Deposit/Withdrawal time and fees: the lower are the time and fees to deposit and withdraw money and the higher the ROI.

The position size in turn, is affected by the following factors:

• Volatility: the lower is the volatility of the instrument and the higher the size.
• Percentage value: the lower is the percentage movement value and the higher the size.
• Leverage: the higher is the leverage offered by brokers and the higher the size.
• Stop out: the lower is the stop out level offered by brokers and the higher the size.

How to calculate the ROI

You can calculate the hypothetical ROI over a given period by following the below steps:

1. Calculate the amount earned by the net Swap in one day using the formulas described in this article.
2. Convert the amount earned by the net Swap in your local currency if needed.
3. Multiply the number obtained in step 2 (or 1 if no conversion was needed) by the numbers of days of the period analysed.
4. Subtract to the number obtained in step 3 the amount paid for spreads/commissions and to make deposits/withdrawals.
5. Divide the number obtained in step 4 by the amount invested and then multiply by 100.

Monthly ROI calculation example

Let’s assume you have 20,000 US$ and want to trade a profitable double Netswap trade on USDZAR pair. The rate of the pair is 14.56, the Swap values and the tick size of both brokers are respectively in Points and 0.00001. The net Swap value is 230.
Let’s also assume that you choose a percentage movement value that is equal to the last six months average of the one-month volatility of the pair, the position size is 160,000, the total transactions’ costs are 60$ and that deposits and withdrawals are instant and free.

The ROI over one month will be:

1. (160,000 * 0.00001 * 230) = 368 ZAR
2. 368 / 14.56 = 25.27 US$
3. 25.27 * 31 = 783.37 US$
4. 783.37 – 60 = 723.37 US$ (since you chose a percentage movement value that is equal to the last six months average of the one-month volatility, you can expect to not being stopped out before one month period, hence there are no additional spreads/commissions’ costs to consider.)
5. (723.37 / 20,000) * 100 = 3.62%

*In addition to the above-mentioned factors, if you want to run our Netswap EA on a VPS, you should also consider its rental cost.