What Is Cumulative profit?

In quantitative finance, cumulative profit tells the overall profit of trading strategy over a time.

Cumulative profit is the excess of net income and gains over net losses, determined on a cumulative basis from the inception of an investment fund through to its termination date. It includes realized trading P&L, positions open P&L, and other total profits or losses generated since the trading strategy’s inception.

As trading strategies reinvest earlier profits, the cumulative profit compounds.

Cumulative profit is expressed as % of yearly gains, as:

To calculate cumulative profit, one must add together all net profit numbers over a specific time frame.

If a trading strategy automatically reinvests its profits to itself, it is called auto-compounding.

See also

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