The process of calculating internal rate of return (IRR) can seem intimidating for many forex traders. Understanding the basic components and methodology of the formula is one of the most important considerations for investors who plan to use it to make informed decisions in the future. In this article we will discuss the applicability of IRR for forex traders, examine the fundamentals of the formula, and provide helpful tips for success. The internal rate of return (IRR) is a widely used financial metric used to measure the profitability of an investment. It measures the return rate earned on the cash inflows generated by the investment relative to the initial outlay. It is most frequently used for evaluating capital investments and is calculated by taking the present value of the future cash flows of the investment and dividing it by the initial cost of the investment. The internal rate of return is expressed as a percentage and is usually higher than the cost of capital. It is important to note that the IRR may not be the same as the net present value (NPV) of the investment, as the two metrics may differ when cash flows span different lengths of time.