The SCAR ratio formula:

            SCAR = ((CV-IV)/IV)+1

Where:

IV = Initial Value (beginning portfolio value of time-frame being measured)
CV = Current Value (portfolio value as of last trade of time-frame being measured)

As a common standard, the formula should be recalculated after each trade gain (or loss) to constantly monitor your performance as it relates to the compounding effect for the daily advancing fiscal year or previous 12 months (which you may then publish). If undesignated the SCAR ratio is always assumed to be of the previous 12 months ending today. However, in practice, for your own internal measurement, In practice the ratio can be used for specific trading periods. It is recommend that a SCAR ratio be calculated for each significant time period such as monthly, quarterly, each calendar year and from inception. Obviously, the shorter the time period measured the lower the number will be; these shorter time measures will have value when comparing them with one another. The proper format for using the SCAR ratio for positive returns is #.## and for negative returns is .## or a decimal of 1. Note that there is no % (percent symbol) used in the ratio even though it is assumed that its ratio is comparing percentages; 1% vs. SCAR%. As an example of how the SCAR ratio might be published, consider this:

"My portfolio's SCAR ratio is 1.09"

It has been suggested that a SCAR ratio seems to correspond closely to the compounded percentage gain. This is true. Another way to calculate your SCAR ratio is to simply divide your actual compounded gains by 100 and then add 1. This will always give your SCAR its relationship to a 1% non-compounded gain.

As you can see, the SCAR ratio is remarkably simple. The compounding effect itself is so simple in fact, that this is part of the reason why most investors overlook it. We urge you however to always know your SCAR ratio. We urge you to actively promote your SCAR ratio to those researching your investment or investment style. The SCAR ratio is offered free to you and the industry in general to use. It is very much needed.