Calculation of Profit and Loss in Forex Trading

When your trading account is in US dollars and you will need to know how your trades will potentially affect your account. Let’s look at what 100points is worth with a lot of 10,000 of the base currency. The main thing to remember is that the value of a point rises proportionally with the size of the lot.
Once again we’ll take the generic pair B/Q. B is the base currency and Q is the quote currency. We’re going to buy and then sell a lot of 10,000 units of base currency B.

Step	Transaction	Current rate	Explanation	Base currency B	Quote currency Q
1	We buy 10000 B	1.3000	When we buy the base currency we sell the quote currency at the current rate. A plus sign (+) before the lot size indicates a buy; a minus sign (-) indicates a sale.	+10000	-13000
2	We sell 10000 B	1.3100	Price rises by 100 points and we close the position.	-10000	+13100
3	We calculate the profit/loss in Q		We are left with 0 units of B and 100 units of Q.	0	+100
4	Q is USD		If Q is USD we have made 100 USD. USD is the quote currency in EUR/USD, GBP/USD, AUD/USD.		+100USD
5	Q is not USD		If Q is not USD, then we need to convert the profit from Q into USD. Let’s say we are working with USD/CHF. We need to divide the profit of 100 Swiss francs by the USD/CHF sell rate, i.e. by 1.3100. This gives us 76.91 USD. When the quote currency is not the dollar the value of a point for the pair is variable.		+76.91 USD

We can calculate our return on a trade using the following formulae where:

Pc=closing price;
Po=opening price;
Pd=sale price of the quote currency against USD in cross-rate pairs.
For pairs where USD is the quote currency (GBP/USD; EUR/USD; AUD/USD):
Profit/Loss = ± (Рс-Ро) × lot

For pairs where USD is the base currency (USD/JPY, USD/CHF, USD/CAD):
Profit/Loss = ± ((Рс-Ро)/Рс) × lot

For cross-rates (no USD in pair):

Profit/Loss = ± ((Рс-Ро)/Pd) × lot

Notes:

• With cross-rates you need to convert the value of our points from the quote currency into USD.
• With a long position these formulae show profit as a positive number of points and with a short position, profit is a negative number of points.
• You can use these formulae to work out the value of a point. To do this Pc-Po = 1 point.