1. What is Return on Leverage (ROL) in Forex?

Definition: ROL measures the percentage return on your invested capital when using leverage in forex trading.

Purpose: It helps traders evaluate the effectiveness of their leveraged positions by showing the return relative to the actual margin used.

2. How Does the ROL Calculator Work?

The calculator uses the formula:

Where:

• \( ROL \) — Return on Leverage (percentage)
• \( Gain \) — Profit from the trade (USD)
• \( Cost \) — Borrowing costs (USD)
• \( Initial\ Margin \) — Your initial investment (USD)
• \( Leverage \) — Leverage ratio (e.g., 10:1 leverage = 10)

Explanation: The formula calculates the net profit (gain minus costs) as a percentage of your leveraged position size.

3. Importance of ROL in Forex Trading

Details: Understanding ROL helps traders assess whether the returns justify the risks of using leverage and compare different trading strategies.

4. Using the Calculator

Tips: Enter your trade profit, borrowing costs, initial margin amount, and leverage ratio. All values must be > 0 (except costs can be 0 if none).

5. Frequently Asked Questions (FAQ)

Q1: What's a good ROL in forex trading?
A: This varies by strategy, but generally higher ROL indicates more efficient use of capital, though higher leverage also increases risk.

Q2: How does leverage affect ROL?
A: Higher leverage increases potential ROL (both positive and negative) as it amplifies both gains and losses relative to your margin.

Q3: Should I include swap/rollover fees in the cost?
A: Yes, include all borrowing-related costs to get an accurate ROL calculation.

Q4: What if my trade resulted in a loss?
A: Enter a negative value for Gain to calculate negative ROL, showing your percentage loss on leveraged capital.

Q5: How is ROL different from ROI?
A: ROI measures return on total position size, while ROL specifically measures return on your actual margin investment when using leverage.