How to calculate the profit and loss of a trade?

Here is an example of the calculation of your profit or loss:

• Let’s trade one lot on EUR/USD, which means that you are buying EUR and selling USD.
• The rate you are quoted is 1.1278/1.1280, so you buy 1 standard lot (100000 units). You are working on the “ask” price of 1.1280 because you are buying EUR.
• Then the price moves to 1.1290, and you decide to close your trade.
• The new quote for EUR/USD is 1.1290/1.1292. Because you initially bought to enter the trade, now you sell to close the trade, so you must take the “bid “price of 1.1290.
• The difference between 1.1280 and 1.1290 is 10 pips, or 0.0010.

According to the formula for calculating the pip, we have (.0001/1.1290) x 100000 = 8.85 x 1.1290 = 9.99$ per pip x 10 pips = 99.9$.

* Remember, when you buy a currency, you will use the ask price, and when you sell, you will use the bid price.

The above example is for when the USD is a counter-currency. Here is another example of when USD is the base currency:

• Let’s buy U.S. dollars and sell Swiss francs.
• The rate you are quoted is 1.4525 / 1.4530. Because you are buying U.S. dollars, you will be working on the “ask” price of 1.4530.
• So you buy one standard lot (100,000 units) at 1.4530.
• A few hours later, the price moves to 1.4550, and you decide to close your trade. The new quote for USD/CHF is 1.4550 / 1.4555.
• Since you’re closing your trade and you initially bought to enter the trade, you now sell to close the trade, so you must take the “bid” price of 1.4550.
• The difference between 1.4530 and 1.4550 is 0.0020, or 20 pips.
• Using our formula from before, we now have (.0001/1.4550) x 100,000 = $6.87 per pip x 20 pips = $137.40.