What is CAGR (Compound Annual Growth Rate)?
Compound annual growth rate expresses how fast capital compounded if growth were steady each year. It is the standard way to compare multi-year performance without overweighting the final year.
Formula
CAGR = (Ending Value ÷ Starting Value)^(1 ÷ Years) − 1
Indian market context (NSE)
Reference levels: Nifty 50 at 24,300, Reliance Industries at ₹1,300, Bank Nifty futures at 55,000 (lot size 30). Examples below show how CAGR (Compound Annual Growth Rate) shows up on Indian index, equity, and futures books — update to live quotes in your journal.
Nifty 50 perspective
Apply CAGR to your Nifty 50 sleeve (spot near 24,300): track the metric on closed index F&O or ETF trades over at least 30 sessions before changing rules. NSE costs and slippage on fast opens often widen the gap between spreadsheet cagr and bank P&L.
Reliance Industries perspective
On Reliance (₹1,300) delivery or intraday trades, calculate cagr with contract-note costs included. Single-name results can look strong on cagr while your Nifty-correlated book tells the opposite — tag “RELIANCE” separately in TradeLyser.
Bank Nifty futures perspective
Bank Nifty futures near 55,000 (lot 30) amplify cagr swings versus cash — one volatile session can move the metric more than a week of Nifty trades. Log margin mode (MIS/NRML) with each entry for honest review.
CAGR vs simple return
₹5 lakh growing to ₹8 lakh in three years is not “60% per year.” CAGR captures the smoothed annual pace — about 16.8% in this example — which is fairer for mentor and investor conversations.
| Window | Use CAGR when |
|---|---|
| 12+ months | Comparing strategies or mentors |
| < 6 months | Prefer simple period return instead |
| With deposits | Use time-weighted return first |
How to validate
- Minimum sample: 30 closed trades on one strategy tag before trusting CAGR (Compound Annual Growth Rate).
- Check for one outlier week inflating CAGR (Compound Annual Growth Rate) — export largest winners and losers.
- Recompute CAGR (Compound Annual Growth Rate) after including brokerage, STT, and slippage on F&O tags.
- Compare CAGR (Compound Annual Growth Rate) on the same date range as profit factor and max drawdown.
How to track in TradeLyser
- Open Strategy Board or analytics → filter by strategy tag and review period.
- Locate the widget or column reporting CAGR (Compound Annual Growth Rate) (or export trades to compute manually).
- Store snapshot values in weekly review: CAGR (Compound Annual Growth Rate), profit factor, drawdown, trade count.
- If CAGR (Compound Annual Growth Rate) is custom, add a spreadsheet column fed from TradeLyser CSV export.
Best practices
- Publish CAGR (Compound Annual Growth Rate) per strategy, not only at account level.
- Use the same calculation window (weekly vs monthly) year-round.
- Pair CAGR (Compound Annual Growth Rate) with sample size in every review slide or note.
- Document formula used so mentors interpret the same number.
Common pitfalls
- Changing rules after fewer than 20 trades because CAGR (Compound Annual Growth Rate) moved slightly.
- Mixing intraday and positional tags when computing CAGR (Compound Annual Growth Rate).
- Ignoring costs so CAGR (Compound Annual Growth Rate) looks better than banked P&L.
- Letting one outlier trade dominate the CAGR (Compound Annual Growth Rate) reading.
How to use this in TradeLyser
Export month-end equity from P&L analytics. Exclude external deposits in skill CAGR; log flows as notes. Compare CAGR alongside max drawdown, not alone.
Reference guide
| Context | Value | Reading |
|---|---|---|
| 5-7% | Conservative | Slightly below market average |
| 8-12% | Market-matching | S&P 500 historical average |
| 15-20% | Good | Outperforming most investors |
| 20-30% | Very good | Top-tier active trading |
| 30-50% | Excellent | Exceptional (verify sustainability) |
| 50%+ | Extraordinary | Rare and often unsustainable |
Related terms
Absolute return is the percentage change in your trading account over a chosen period, ignoring whether Nifty or Bank Nifty did better or worse. It answers a simple question: did your capital grow?
Drawdown at any moment is the gap between your latest equity peak and today’s equity. Max drawdown is the largest such gap over a period.
Return on investment is the percentage profit or loss relative to the money put at risk or invested. In trading, clarify whether cost means margin deployed or full notional.
Sharpe ratio measures how much return you earned for each unit of overall volatility. Higher values generally mean smoother growth relative to swings — on a long enough sample.
FAQ
Use CAGR for intraday books?
Only on capital held over many months; short horizons use simple period return.
Deposits mid-year and CAGR?
Exclude external flows or use time-weighted return — deposits are not skill.
Start journaling with
TradeLyser
Connect your broker, tag strategies, and review performance with AI-assisted insights.