Calculating profit and loss may seem complicated and tedious. Don’t worry, we have got you covered!

In this article we are going to show you the simplest way to carry out these calculations, so you won’t have to seek help with understanding these figures anymore.

• Profit calculation
• Loss calculation
• The effect of account currency on calculations
• Useful tools

Before we get started, let us look at some information which is very useful when making such calculations:

1. Of the two prices in a pair of quotes, the higher one is always the ask price, while the lower is always the bid price
2. Buy orders open at ask price and close with the bid price.
3. Sell orders open at bid price and close with the ask price.
4. Buy orders make a profit if the closing price is higher than the opening price, while sell orders make a profit when the closing price is lower than the opening price.
5. Buy orders make a loss if the closing price is lower than the opening price, while sell orders make a loss when the closing price is higher than the opening price.
6. The regular contract size for commonly used currency pairs is 100,000 units and the point size is 0.0001.

Profit calculation

Assume you have placed a buy order in EURUSD for 5 lots. The prices at the time of buying were 1.08155/1.08172.

You close the order 3 days later when the prices are 1.08188/1.08205.

Considering buy orders open at ask price and close with the bid price, the opening price of this order is 1.08172 and the closing price is 1.08188.

Since the price has risen, you have made a profit.

Before we calculate the profit, we will need to calculate the pip value of this trade, which is the amount of money you will gain or lose for every pip the price rises or falls.

Pip Value = Number of lots x Contract size x Pip size

= 5 x 100,000 x 0.0001

= 50 USD (it is always calculated in the quote currency)

Profit = (Difference in price / Pip size) x Pip Value

= ((1.08188 - 1.08172) / 0.0001) x 50

= 80 USD

Thus, you have made a profit of USD 80 from this trade.

Loss calculation

Assume you have placed a sell order in GBPUSD for 3 lots. The prices at the time of selling were 1.24177/1.24195.

You close the order 2 days later when the prices are 1.24207/1.24221.

Considering sell orders open at bid price and close with the ask price, the opening price of this order is 1.24177 and the closing price is 1.24221.

Since the price has risen, you have made a loss.

Before we calculate the loss, we will need to calculate the pip value of this trade, which is the amount of money you will gain or lose for every pip the price rises or falls.

Pip Value = Number of lots x Contract size x Pip size

= 3 x 100,000 x 0.0001

= 30 USD (it is always calculated in the quote currency)

Loss = (Difference in price / Pip size) x Point profit

= ((1.24221 - 1.24177) / 0.0001) x 30

= 132 USD

Thus, you have made a loss of USD 132 from this trade.

The effect of account currency on calculations

When calculating profit or loss, your account currency can modify how conversions apply if your account currency does not match your base or quote currency.

• If your account currency is the same as your base currency: then the closing price is used to calculate profit and loss to the account currency.
• If your account currency does not match the base, or quote currency: the price used will be calculated by using the the price of a currency pair that involves your the quote currency and your account currency.

We recommend reading on this topic about which price to use for conversions when calculating profit or loss in an account currency to further understand these scenarios that provide exceptions for the approaches outlined above.

Useful tools

At Exness, we provide you some tools that can come in handy with calculations and make your life easier. Be sure to check out our Investment Calculator for a one-click-solution to calculation troubles and also our currency converter to check exchange rates at any given point in time.