What Is ROI vs ROE? Definition & Example

Return on investment and return on equity describe the same profit against different denominators, and confusing them is the source of a great deal of misleading crypto content.

ROI measures profit against the full position notional — it tracks the price move itself. ROE measures profit against the margin you actually posted. Without leverage the two are identical. With leverage they diverge by exactly the leverage multiple.

A worked example: long 20 units at $100, exit at $112. Profit is $240 on a $2,000 position, so ROI is 12% — matching the 12% price move. But at 10x you only posted $200 of margin, so ROE is 120%. Same trade, same $240, two very different-looking numbers.

Exchanges display ROE because it is the larger figure, and screenshots circulate for the same reason. When someone posts a 400% gain, the underlying move is usually around 20% at 20x leverage — impressive, but a different claim than "this asset went up 400%". Reading the leverage before the percentage costs nothing and prevents a lot of misplaced envy.

Both numbers are legitimate; they answer different questions. ROI tells you whether your read on the market was good. ROE tells you how efficiently you deployed capital — and, implicitly, how much liquidation risk you accepted to get it. A high ROE achieved at 50x is not the same accomplishment as the same ROE at 3x, and the distinction shows up eventually in the drawdown.