Calculating Profit and Loss

Our online trading platform will automatically calculate the P&L of your open positions, but it is useful to understand how this calculation is made to understand your profit and loss potential on each trade.

Example 1:

Let's say that the current bid/ask for EUR/USD is 1.4616⁰/19⁰, meaning you can buy 1 euro for 1.4619⁰ or sell 1 euro for 1.4616⁰.

Suppose you decide that the Euro is undervalued against the US dollar, and you expect it to strengthen, you would buy Euros (simultaneously selling dollars), and then wait for the exchange rate to rise.

To make the trade you buy 100,000 Euros, paying 146,190 dollars (100,000 x 1.4619⁰). At 1% margin, your initial margin deposit would be approximately $1,461 for this trade.

If as you expected, the Euro strengthens you can realise a profit by selling EUR/USD to close your trade. If the Euro had strengthened to 1.46230⁰/26⁰, you would sell 100,000 Euros at the current rate of 1.4623⁰, and receive $146,230

To calculate your profit:

You bought 100,000 Euros at 1.4619⁰, paying $146,190.

You sold 100,000 Euros at 1.4623⁰, receiving $146,230.

That's a difference of 4 pips, or in dollar terms ($146,190 - 146,230 = $40).

Total profit = US $40.


Let's say that we once again buy EUR/USD when trading at 1.4616⁰/19⁰.

You buy 100,000 Euros paying 146,190 dollars (100,000 x 1.4619⁰) - as in example 1.

However, in this example the Euro weakens to 1.4611⁰/14⁰. To minimise your loss you sell 100,000 Euros at 1.4611⁰ and receive $146,110.

To calculate your loss:

You bought 100k Euros at 1.4619⁰, paying $146,190.

You sold 100k Euros at 1.4611⁰, receiving $146,110.

That's a difference of 8 pips, or in dollar terms ($146,190 - $146,110 = $80).

Total loss = US $80.