Return on Investment (ROI) Beginner's Guide
ROI Used to compare an investment’s profit or loss with its total cost, but cannot independently reflect time, risk, or opportunity cost. Fees, Gas costs, and other related expenses should be included in the calculation, and the result should be assessed together with other indicators.
ROI Meaning and Calculation
Return on investment measures an investment’s profitability relative to its total cost and is usually expressed as a ratio or percentage. The basic formula is “(current value − total cost) ÷ total cost.” A positive result indicates a profit, while a negative result indicates a loss; transaction fees, Gas costs, and other acquisition expenses should be included when calculating total cost.
Limitations That Cannot Be Ignored
ROI does not itself account for the time required to earn the return, so the same ROI may correspond to completely different capital efficiency. It also cannot reflect volatility, downside risk, or opportunity cost. When comparing different investments, annualized metrics, risk assessments, and time-adjusted return metrics should also be considered.
Applications in Cryptocurrency
for spot trading can be calculated based on the purchase and sale values and complete costs; staking and liquidity mining commonly use ROI or APY to compare returns over different periods. DeFi strategies may also be affected by factors such as impermanent loss, so nominal profit does not necessarily equal the final actual return.APR
Original Tutorial
https://www.binance.com/zh-CN/academy/glossary/return-on-investment
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