How do I calculate profits and losses?

Now that you know how forex is traded, it’s time to learn how to calculate your profits and losses. When you close out a trade, take the price (exchange rate) when selling the base currency and subtract the price when buying the base currency, then multiply the difference by the transaction size. That will give you your profit or loss.

Price (exchange rate) when selling the base currency – price when buying the base currency X transaction size = profit or loss

Let’s look at an example.

Assume you buy Euros at $1.2178 per Euro and sell Euros at $1.2188 per Euro. The transaction size is 100,000 Euros. To calculate your profit or loss, you take the selling price of $1.2188, subtract the buying price of $1.2178 and multiply the difference by the transaction size of 100,000. $1.2188 – 1.2178) X 100,000 = $1In this example, you would have a $100 profit from

this transaction. 00 b

Let’s try it again using a different currency.
Assume you buy British pounds at $1.8384 and sell them at $1.8389. The transaction size is 10,000. What is your profit or loss?
When you think you know the answer, advance to t

By following the formula we discussed earlier, you should be able to determine that you would see a $5.00 gain from this transaction.

($1.8389 – $1.8384) X 10,000 = $5.00

Now you try it.
If you sell 100,000 Euros at $1.2170 per Euro and buy 100,000 Euros at 1.2180 per Euro, would you have a profit or loss on the transaction and how much would it be?
When you think

you have the answer, advance to the

Take the selling price of $1.2170 and subtract the buying price of $1.2180 and then multiply the difference by 100,000.
($1.2170 – $1.2180) X 100,000 = –$100
If you calculated a loss of $100, you calculated correctly.

You can also calculate your unrealized profits and losses on open positions. Just substitute the current bid or ask rate for the action you will take when closing out the position. For example, if you bought 100,000 Euros at 1.2178 and the current bid rate is 1.2173, you have an unrealized loss of $50.
($1.2173 – $1.2178) X 100,000 = –$50
Similarly, if you sold 100,000 Euros at 1.2170 and the current ask rate is 1.2165, you have an unrealized profit of $50.
($1.217If the quote currency is not in US dollars, you will have to convert the profit or loss to US dollars at the dealer’s rate0 – $1.2165) X 100,000 = $50

Let’s look at an example using a USD/JPY spread. If you lost 50,000 Japanese yen on the transaction and the dealer’s rate is $.0091 for each yen, what is your loss in dollars?

By multiplying the transaction size (50,000) by the dealer's rate ($.0091), you will find that your loss is $455

Remember that you must also subtract any dealer commissions or other fees from your profits or add them to your losses to determine your true profits and losses. Also, remember that the dealer makes money from the spread. If you immediately liquidate your position using the same spread, you will automatically lose money 50,000 X $.0091 = $455