What Is Growth in Trading Bots?

Growth is one of the most fundamental metrics for evaluating trading bot performance. It measures the increase in portfolio value over time, reflecting how effectively your automated trading strategy is generating returns. In the context of algorithmic trading, growth is always measured in the quoted currency (also called the trading symbol or base currency) of your portfolio.

Understanding growth in the context of trading bots is essential because it directly shows whether your bot's trading decisions are creating value over time.

Understanding Trading Symbols and Quoted Currencies

Before diving into growth calculations, it's important to understand how trading bots measure value:

What Is a Quoted Currency?

The quoted currency (or trading symbol) is the currency in which your portfolio's value is denominated. All growth calculations are performed in this currency.

Why Quoted Currency Matters

When evaluating a trading bot's growth:

• Consistency: All gains and losses are measured in the same unit
• Comparability: You can compare bots trading different assets if they share the same quoted currency
• Real Value: Growth reflects actual purchasing power in that currency

A bot might show 50% growth in USDT, but if you need to convert to EUR, exchange rate fluctuations could affect your realized returns.

Formula and Calculation

Simple Growth (Absolute)

$$\text{Growth} = \text{Current Portfolio Value} - \text{Initial Portfolio Value}$$

For a trading bot with USDT as the quoted currency:

• Initial deposit: 10,000 USDT
• Current value: 12,500 USDT
• Growth: $12{,}500 - 10{,}000 = 2{,}500$ USDT

Growth Rate (Percentage)

$$\text{Growth Rate} = \frac{\text{Current Value} - \text{Initial Value}}{\text{Initial Value}} \times 100\%$$

Using the same example:

$$\text{Growth Rate} = \frac{12{,}500 - 10{,}000}{10{,}000} \times 100\% = 25\%$$

Compound Annual Growth Rate (CAGR)

CAGR smooths out volatility to show the equivalent annual growth rate:

$$\text{CAGR} = \left(\frac{\text{Ending Value}}{\text{Beginning Value}}\right)^{\frac{1}{n}} - 1$$

Where:

• $n$ = Number of years the bot has been running

This is particularly useful for comparing trading bots that have been active for different periods.

📊 Learn more: For a comprehensive guide on CAGR, including detailed calculations, limitations, and practical examples, see our dedicated CAGR (Compound Annual Growth Rate) page.

Growth Metrics for Trading Bots

Time-Based Growth Metrics

Trading bots typically display growth over multiple time frames:

Growth Per Trade

Beyond time-based metrics, trading bots also track:

$$\text{Average Growth Per Trade} = \frac{\text{Total Growth}}{\text{Number of Trades}}$$

This helps understand the efficiency of individual trading decisions.

Realized vs. Unrealized Growth

A trading bot showing 20% growth might have:

• 15% realized (from completed trades)
• 5% unrealized (from current open positions)

Growth in Different Market Conditions

Trading bots behave differently across market conditions:

Bull Markets

• Trend-following bots: High growth potential
• Mean reversion bots: Moderate growth
• Expected growth: Often exceeds buy-and-hold strategies

Bear Markets

• Short-selling bots: Can achieve positive growth
• Long-only bots: May show negative growth
• Hedging bots: Designed to minimize losses

Sideways Markets

• Range-trading bots: Optimal conditions
• Trend-following bots: Lower growth, more false signals
• Arbitrage bots: Consistent small gains

Growth vs. Risk: The Complete Picture

High growth alone doesn't indicate a good trading bot. Always consider risk metrics:

Bot B and C are often preferable despite lower absolute growth due to better risk-adjusted returns.

Multi-Currency Considerations

When trading bots operate across multiple pairs or quoted currencies:

Portfolio Aggregation

If a bot trades multiple pairs with different quoted currencies:

• BTC/USDT positions: 5,000 USDT value
• ETH/EUR positions: 3,000 EUR value

To calculate total growth, values must be converted to a single quoted currency using current exchange rates.

Currency Risk

Trading bots with different quoted currencies expose you to:

• Exchange rate risk: EUR growth might look different when converted to USD
• Volatility differences: Some quoted currencies are more volatile than others

Stablecoin Advantages

Many crypto trading bots use stablecoins (USDT, USDC, DAI) as quoted currencies because:

• Minimal currency volatility
• Easy comparison across time periods
• Clear profit/loss calculations

Calculating Growth with Deposits and Withdrawals

When you add or remove funds from a trading bot, simple growth calculations become misleading.

Time-Weighted Return (TWR)

TWR measures the bot's pure performance, independent of your cash flows:

$$\text{TWR} = \left[(1 + R_1) \times (1 + R_2) \times \cdots \times (1 + R_n)\right] - 1$$

Use TWR to evaluate the trading bot's skill.

Money-Weighted Return (MWR)

MWR reflects your actual experience including timing of deposits:

• Deposit before a winning streak → Higher MWR
• Deposit before a losing streak → Lower MWR

Trading Bot Growth Benchmarks

How to evaluate if a trading bot's growth is good:

Crypto Trading Bots

Traditional Market Bots

Monitoring Growth Over Time

Growth Charts

Most trading bot platforms display:

• Equity curve: Portfolio value over time
• Growth percentage chart: Cumulative returns
• Monthly growth bars: Period-by-period performance

Warning Signs

Watch for these patterns in growth charts:

• Sudden spikes: May indicate high-risk trades
• Steep drops: Potential strategy failure
• Flat periods: Bot may not be trading effectively
• High volatility: Inconsistent risk management

Example: Trading Bot Growth Analysis

Consider a crypto trading bot with EUR as the quoted currency:

Total Growth: €3,065 (30.65%) Average Monthly Growth: 4.6% Annualized Growth: (1.3065)^(12/6) - 1 = 70.7% CAGR (projected): 70.7%

FAQs

What growth rate should I expect from a trading bot?

Expected growth varies significantly based on:

• Asset class: Crypto bots often target higher returns than stock bots
• Strategy type: Aggressive strategies aim for higher growth
• Risk tolerance: Higher growth usually means higher risk
• A well-performing crypto bot might target 30-100% annually, while a traditional market bot might aim for 15-30%.

How does the quoted currency affect my returns?

Your returns are always measured in the quoted currency. If you trade BTC/USDT, your growth is in USDT. When you withdraw to a different currency (e.g., EUR), you'll need to account for the USDT/EUR exchange rate, which can increase or decrease your actual returns.

Should I choose a bot based on growth alone?

Never. Growth should be evaluated alongside:

• Maximum drawdown: Largest peak-to-trough decline
• Sharpe ratio: Risk-adjusted returns
• Win rate: Consistency of profitable trades
• Trade frequency: How actively the bot trades
• Strategy type: Whether it matches your risk tolerance

How often should I check my trading bot's growth?

• Daily: Quick health check
• Weekly: Detailed performance review
• Monthly: Strategy assessment and comparison to benchmarks
• Avoid making changes based on short-term growth fluctuations.

What's the difference between growth and profit?

• Growth: Change in total portfolio value (realized + unrealized)
• Profit: Specifically refers to realized gains from closed trades
• A bot can show positive growth from unrealized gains even if no trades have been closed for profit.

Related Metrics

Growth should be evaluated alongside these other key metrics:

• CAGR: Compound Annual Growth Rate for comparing performance across different time periods
• Sharpe Ratio: Risk-adjusted returns
• Drawdown: Maximum peak-to-trough decline
• Volatility: Consistency of returns
• Win Rate: Percentage of profitable trades

The Bottom Line

Growth is the most intuitive metric for evaluating trading bot performance—it directly answers "Is my portfolio increasing in value?" However, always measure growth in the context of your quoted currency, consider the time frame, and evaluate alongside risk metrics. A trading bot with steady, sustainable growth and controlled risk is typically preferable to one with volatile, high-growth periods followed by significant drawdowns.