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Deposit-adjusted return

Performance measured after stripping out deposits and withdrawals, so account growth from funding is not mistaken for trading skill.

An account that starts at $10,000, receives $5,000 of deposits and ends at $16,500 did not make 65%. It made $1,500 on an average capital base somewhere between $10,000 and $15,000 - roughly 11-15% depending on when the deposit landed.

Ignoring this is the most common self-deception in retail records, and it runs both ways: a funded account that is down on trading can still show a rising balance, which delays the moment of recognising a broken strategy by months.

The fix is to compute returns on sub-periods between cash flows and chain them - see time-weighted-vs-money-weighted - or, more simply, to track profit and loss in dollars against the capital actually at work. Any equity curve you publish should be marked with deposit and withdrawal dates.

Related: time-weighted-vs-money-weighted, internal-rate-of-return, equity-curve, cumulative-return

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