Account age and deposits

Money in, money out

A trading account rarely holds the same deposit from start to finish. Owners add money, take profits out, and sometimes move large amounts at convenient moments. Each of these changes the balance without a single trade being placed, and each can make a percentage figure mean something quite different from what it seems.

One account, two honest answers

Follow a single invented account:

1. Deposit 1,000. The strategy gains 500, so the balance is 1,500. The strategy is up 50%.
2. Deposit another 9,000. The balance is now 10,500.
3. The strategy loses 1,000. The balance is 9,500.

How did it do? There are two honest answers.

• Measured on the money invested: 10,000 went in and 9,500 is there now. That is −5%.
• Measured on the strategy’s own trading: it made 50%, then lost 1,000 out of 10,500, which is about 9.5%. Chained together, 1.5 × 0.905 = 1.357, so the strategy is +35.7%.

Both are correct. The first describes the investor’s money, the second describes the strategy’s skill. The trouble starts when one is presented as if it were the other.

How Myfxbook separates them

Myfxbook shows both numbers:

• Gain uses a time-weighted return. Each trade’s result is measured against the balance the account had when the trade was opened, so deposits and withdrawals do not change the figure. This is the number that describes the strategy.
• Absolute Gain compares total profit with net deposits, total deposits minus total withdrawals, and ignores when the money moved. This is closer to what the owner’s pocket experienced.

When the two are far apart, money has moved in or out at meaningful moments. That is not wrong in itself, but it is a reason to open the history and see what happened.

The flattering pattern

The most common distortion runs like this: a small account produces a spectacular percentage while it is small, then a large deposit arrives. The time-weighted gain keeps the spectacular early percentage, even though almost all of the money was traded after the deposit, under different conditions and often with smaller returns.

Check the deposits in the account’s history. If most of the capital arrived recently, the headline percentage was mostly earned by a much smaller account.

Why a young account proves little

Markets go through phases: calm trends, violent ranges, news shocks, quiet summers. A strategy that has traded for four months has seen perhaps one or two of them. Its record may be perfectly genuine and still say almost nothing about how it handles the phase it has not met yet.

EU rules for regulated investment firms reflect the same idea. When they show past performance, it has to cover the preceding five years, or the whole period if the product is younger, and it has to be based on complete 12-month periods, with a clear warning that past performance is not a reliable indicator of future results. A few months of history does not contain a single complete 12-month period.

What a trustworthy history looks like

There is no magic threshold, but a record becomes more informative when:

• It covers at least one full year, and ideally several.
• It includes several hundred trades, so the statistics are not the product of a lucky handful.
• It shows at least one real drawdown and its recovery, so you have seen how the strategy behaves when it is wrong.
• Deposits and withdrawals are visible and unremarkable, with Gain and Absolute Gain telling a consistent story.

Every one of our strategy pages links to its live Myfxbook account, where you can check the start date, the deposit history and both gain figures yourself.