In trading and investing, ROE stands for Return on Equity. It is a financial ratio that measures a company's profitability in relation to its shareholders' equity. In simpler terms, it shows how effectively a company uses the money invested by its shareholders to generate profits.

🔢 ROE Formula:

\text{ROE} = \frac{\text{Net Income}}{\text{Shareholders' Equity}} \times 100

📌 Key Points:

Net Income: The company's profit after taxes and expenses.

Shareholders' Equity: The total assets minus total liabilities — essentially the net worth of the company from the shareholders' point of view.

🧠 Why ROE Matters in Trading:

Performance Indicator: A higher ROE generally means the company is efficiently using its capital to generate profits.

Comparison Tool: Investors use ROE to compare companies within the same industry.

Investment Decision: Traders and investors may prefer stocks with consistently high ROE, indicating strong financial health and potential for growth.

⚠️ Caution:

ROE can be artificially inflated if a company has low equity (due to debt or buybacks), so it's important to consider debt levels and other ratios in conjunction with ROE.

Best used alongside other metrics like Return on Assets (ROA), Debt-to-Equity, and Profit Margin.

Let me know if you're asking about ROE in a trading platform context (like leverage trading), as it can also refer to Return on Equity in individual trades, especially in crypto or forex.