Calculating Gross Profit
27 Oct, 20

Gross profit can be calculated with the following formula…

Gross Profit = (Close Price x Contract Size) – (Open Price x Contract Size)

The above calculation is easy when you’re trading something in your base currency. Such as EURUSD when your account is in USD. However what if you trade a pair with a different base currency such as EURGBP?

“Completing this task amid rapidly evolving forex conditions can be a challenge. Every currency pair is unique, as are trade-related variables such as applied leverage and account denomination.”

FXCM

Example: Let’s calculate the USD profits/losses for a position on EURGBP.

The position:

Contract Size (in lots): 0.19 lots

Trading Instrument: EURGBP

EURGBP OpenPrice: 0.6983

EURGBP ClosePrice: 0.6883 (0.6983 – 0.6883 = 0.0100 = 100 pips)

Contract Size (in EUR): 19,000 EUR

GBPUSD Rate: 2.0256 (to convert the profits/losses from GBP to USD)

Calculation:

Profit/Loss = (19,000 × 0.6983) – (19,000 × 0.6883) = 13267.7 – 13077.7 = 190 GBP.

Now we’ll convert to USD: 190 GBP × 2.0256 = 384.86 USD.

So, the position earned 384.86 USD in profits.

Alpari

In the above example when your account denomination is different to the symbol being traded, your broker automatically converts your profit from GBP’s into USD. For Trading Vault to correctly calculate your gross profit we would need to know the exchange rate your broker used at the precise moment you open and closed your trade.

Trading Vault cannot automatically calculate your gross profit as we do not know the exchange rate between your account denomination and the pair being traded. This value cannot be known accurately, across all brokers, especially for historical data. The same situation will arise if you are trading stocks or cryptocurrencies. As such you are required to manually enter your gross profit into Trading Vault to ensure all numbers in your journal are accurate.