Implementation guide · Copy Trading and Allocation
Cash-Flow-Adjusted Returns for Strategy Reporting
Separate deposits and withdrawals from performance using a two-period return example, with valuation timing, fee treatment and reporting checks.
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Published by FxTrusts, a supplier of brokerage and prop firm technology. Prepared with AI-assisted research and drafting; reviewed against the cited public sources. Examples are illustrative. Product links describe our services.
Quick answer
Account value can increase because money was added, even when investment performance is negative. Cash-flow-adjusted reporting separates external flows from returns. A time-weighted method links returns for subperiods around cash flows, while a money-weighted method addresses the investor’s flow timing and amounts.
Do not treat a deposit as a gain
Comparing ending equity with initial equity without considering external cash flows can substantially misstate performance. A withdrawal can create the opposite error. Identify deposits, withdrawals, transfers and corrections separately from trading results. Also decide whether fees are included in the reported return. The purpose is a coherent measure, not choosing whichever formula produces the highest percentage for a strategy page.
Calculate subperiod returns around the flow
For an exact time-weighted illustration, value the account immediately before an external flow, then start the next subperiod with the post-flow value. Calculate each subperiod’s return and compound the factors. cTrader Copy documents a time-weighted approach for its platform; Interactive Brokers explains why time- and money-weighted measures answer different questions. The exact valuation frequency and cash-flow convention must be stated for any real report.
Preserve the assumptions that make the calculation valid
Missing valuations at cash-flow times can require an approximation, which should be labelled. Non-positive starting values create additional mathematical and interpretive issues; do not divide by zero or silently replace the denominator. Currency conversion, fees, account transfers and corrected data can also affect the series. Keep the raw values and method version so a reviewer can reproduce a published result after a data correction.
Explain what the percentage does not show
A return measure does not by itself describe drawdown, leverage, liquidity or suitability. Two accounts can have the same time-weighted result and different cash profits because the amounts invested differed. A provider’s return and a follower’s result can diverge through execution, fees and timing. Present the method with the relevant period and limitations; do not convert an illustrative calculation into a ranking, earnings promise or claim of verified performance.
A deposit makes account growth look positive
This synthetic account starts at 2,000 and grows to 2,200, a 10% first-subperiod return. A 1,000 deposit raises the next starting value to 3,200. It then falls to 2,880, a 10% loss for the second subperiod. Linked return is 1.10 × 0.90 − 1 = −1%. Raw account growth is 44%, but that includes the deposit. Fees and conversion are excluded.
| Stage | Value | Performance treatment |
|---|---|---|
| Start | 2,000 | First denominator |
| Before deposit | 2,200 | +10% |
| Deposit | 1,000 | External flow, not gain |
| After deposit | 3,200 | Second denominator |
| End | 2,880 | −10% in second period |
| Linked return | 1.10 × 0.90 − 1 | −1% |
Implementation checklist
- Identify external flows separately from trading and fee events.
- State valuation timing and any approximation used around cash flows.
- Label time-weighted versus money-weighted methodology and fee treatment.
- Publish the period and limitations without implying future or independently verified returns.
Sources
These documents support the reference. Check the original publication for current requirements and the limits of its scope.
- cTrader Copy return calculationhelp.ctrader.com
- Interactive Brokers return-method white paperwww.ibkrguides.com
- MetaTrader 5 trading history reportwww.metatrader5.com
Continue with the broader guides
Connect this reference to platform selection and the wider operating workflow.