When you calculate your profit from a trade, you should remember several factors. They include the type of asset you’re trading (stocks, Forex, commodities, etc.) and the specific details of the trade, such as the entry price, exit price, and any associated fees or commissions. Headway analysts explain how to calculate your profits correctly and easily make it your routine.

Before calculating the profits

Depending on the platform you use for trading, the profit calculation may be automated. You can typically find the realized profit or loss directly in your trade history or account statement. However, understanding the calculation process can help you verify and cross-check the results.

Calculation algorithm

First, you identify the asset you traded, the quantity or position size you bought or sold, the entry price (the price at which you entered the trade), and the exit price (the price at which you closed the trade).

Find the difference between the exit price and the entry price. If you bought an asset, subtract the entry price from the exit price. If you sold an asset, subtract the exit price from the entry price. Take into account any fees or commissions associated with the trade. These can include brokerage fees, spread costs (for forex trading), or transaction fees. Subtract these costs from the price difference.

Multiply the adjusted price difference by the quantity or position size of the asset you traded. This will give you the total profit or loss for the trade.

Here’s a formula to summarize the calculation:

Profit/Loss = (Exit Price – Entry Price – Transaction Costs) x Position Size

This calculation provides the gross profit or loss from the trade. It doesn’t account for other factors such as taxes, interest charges, or financing costs. If the asset is denominated in a different currency than your account currency, you may need to consider currency conversion rates as well.

Examples

Let’s say you traded the EURUSD currency pair. You bought 10,000 euros (EUR) at an entry price of 1.1500 USDEUR. Later, you sold all the euros at an exit price of 1.1800 USDEUR. The transaction also incurred a spread cost of 10 pips.

•    Currency pair: EUR/USD
•    Quantity: 10,000 euros
•    Entry price: 1.1500 USDEUR
•    Exit price: 1.1800 USDEUR

We calculate the price difference:

Exit price – Entry price = 1.1800 – 1.1500 = 0.0300 USDEUR