CAGR (Compound Annual Growth Rate)
The annualized rate of return that accounts for compounding, showing how fast your account grows per year.
Formula
More Details
What is CAGR?
CAGR — Compound Annual Growth Rate — is the single most intuitive measure of how fast your trading account is growing. It answers: "If my account grew at a smooth, constant rate, what annual percentage would produce the same final value?"
Unlike a simple total-return number, CAGR normalizes for time. A 50% return over 6 months is very different from 50% over 5 years. CAGR makes them directly comparable by converting everything to an annualized rate.
Formula
CAGR = (Ending Value / Starting Value)^(252 / n) − 1
Where:
- Starting Value = your total deposits (capital you put in)
- Ending Value = starting deposits + total realized P&L (current account equity from trades)
- n = number of trading days in the period
- 252 = standard trading days per year
The result is expressed as a percentage. A CAGR of 15.00% means your account is growing at 15% per year on a compound basis.
Interpretation
| CAGR | Context |
|---|---|
| < 0% | Losing money — account is shrinking |
| 0 – 5% | Below average — similar to a savings account or bonds |
| 5 – 15% | Moderate — in line with long-term equity market averages |
| 15 – 30% | Strong — outperforming most benchmarks |
| 30 – 50% | Excellent — top-tier active trader territory |
| > 50% | Outstanding — verify sustainability and sample period |
Why CAGR Matters for Traders
It normalizes for time
"I made 80% last year" vs "I made 200% over 4 years." Which is better? CAGR tells you immediately: 80% vs ~31.6%. The first trader is growing faster.
It accounts for compounding
A 20% return compounded over 3 years is not 60% — it's 72.8%. CAGR properly captures this because it works backward from the ending value.
It's the standard benchmark
When you hear "the S&P 500 returns ~10% per year," that's a CAGR. Using CAGR for your trading makes your results directly comparable to any benchmark.
A Practical Example
| Details | |
|---|---|
| Deposits | $25,000 |
| Total realized P&L | $18,000 |
| Ending account value | $43,000 |
| Trading days | 400 |
CAGR = ($43,000 / $25,000)^(252/400) − 1 = 1.72^0.63 − 1 = 0.4245 = 42.45%
This trader's account is compounding at 42.45% per year — outstanding performance. Even if the raw total return is "only" 72%, annualizing it via CAGR reveals the true pace of growth.
CAGR vs Simple Returns
| Metric | Formula | What it misses |
|---|---|---|
| Total Return | (End − Start) / Start | Time — 100% in 1 year ≠ 100% in 5 years |
| Average Annual Return | Total Return / Years | Compounding — understates true growth rate |
| CAGR | (End / Start)^(1/years) − 1 | Nothing — the gold standard |
Prerequisites
CAGR requires knowing your starting capital. In TradesViz, this means you need to enter your deposits in the Money Transactions tab. Without deposits, CAGR shows N/A because we can't compute a meaningful growth rate without knowing the base amount.
To set up deposits:
1. Go to Summary > Money Transactions
2. Click "Add Transaction"
3. Enter your initial deposit amount and date
4. Record any subsequent deposits or withdrawals
Limitations
- Assumes reinvestment: CAGR assumes all profits are reinvested. If you withdraw profits, the effective CAGR is different from what you'd compute.
- Smooths volatility: A trader who made 100% year 1, lost 50% year 2, and made 100% year 3 has the same CAGR as someone who made ~26% steadily each year. The paths are very different.
- Deposit timing matters: If you add capital mid-period, the simple CAGR formula slightly misrepresents the true rate of return. For complex deposit patterns, consider using a time-weighted return instead.
- N/A without deposits: If you haven't recorded deposits in TradesViz, CAGR will show N/A.
How TradesViz Calculates It
TradesViz fetches your total deposits and withdrawals from the Money Transactions tab for the selected date range and trading accounts. Starting capital = deposits − withdrawals. Ending value = starting capital + total realized P&L from closed trades. Trading days are counted from the daily P&L series. The standard 252 trading days/year is used for annualization.
How TradesViz Does It Better
- Deposit-aware: Uses your actual money transactions for accurate starting capital
- Filter-aware: Compute CAGR for specific accounts, date ranges, or setups
- Paired with Sharpe, Sortino, and Calmar: See both raw growth rate and risk-adjusted performance together
- Custom dashboard widget: Track your annualized growth rate at a glance
Where to find it in TradesViz
Example
A trader with $25,000 in deposits and $43,000 ending value over 400 trading days has a CAGR of 42.45%.