Formula
CAGR = (End value / Start value)^(1 / years) minus 1
An EA that grew $10,000 to $18,000 over 5 years has a CAGR of approximately 12.5%.
Why CAGR matters more than cumulative return
A 100% cumulative return over 10 years (CAGR 7.2%) is very different from 100% over 3 years (CAGR 26%). CAGR normalises for time, making strategies comparable regardless of backtest length.
The compounding assumption
CAGR assumes gains are reinvested. EAs configured with fixed lot sizes do not compound, so their actual return curve is linear. CAGR slightly overstates what a fixed-lot EA delivers in practice.