Calculating Profit and Loss Examples
in Forex Trading Explained

Profit and loss is often shown as P&L on a forex trading platform.

It shows how much a position has changed in value. A positive P&L means the price movement was in the position’s direction before charges. A negative P&L means the price movement was in the opposite direction before charges.

The calculation may look difficult at first because forex prices use decimal places, pips, buy prices and sell prices. However, the main process is simple.

You need to know four things: the position direction, the opening price, the closing price and the position size. After that, you should check whether charges apply.

This article explains forex P&L using simple examples only. All prices and figures are for educational purposes. They are not live prices or trading recommendations.

Start with the Position Direction

A forex position can be a buy position or a sell position.

A buy position is linked to a higher market price after the position opens. A sell position is linked to a lower market price after the position opens.

This is important because a buy and sell position use different prices on the quote screen.

The difference between these prices is called the spread. This means the spread is already part of the basic P&L calculation.

A Simple EUR/USD Buy Example

Imagine EUR/USD is shown as follows:

A person opens a buy position. The opening price is 1.0842 because this is the available buy price.

Later, EUR/USD changes to:

To close the buy position, the available sell price is used. The closing price is therefore 1.0852.

Now compare the opening price with the closing price.

For EUR/USD, this is a movement of 10 pips.

Now imagine the position size is 10,000 units.

For many non-JPY forex pairs, one pip is 0.0001. The pip value for this example is:

The position moved by 10 pips. The pip value is 1 US dollar.

This example shows a positive P&L of 10 US dollars before any applicable charges.

What Happens When a Buy Position Moves Lower?

Now use the same EUR/USD buy position.

The position opens at 1.0842. However, later the platform shows:

The closing sell price is 1.0832.

This is a movement of negative 10 pips.

Using the same 10,000-unit example, one pip is equal to 1 US dollar.

This example shows a negative P&L of 10 US dollars before charges.

The calculation is the same as before. The only difference is that the market moved lower after a buy position was opened.

A Simple EUR/USD Sell Example

Now imagine a sell position instead.

EUR/USD is quoted at:

A person opens a sell position. The opening price is 1.0840 because this is the available sell price.

Later, the quote changes to:

To close the sell position, the available buy price is used. The closing price is 1.0830.

For a sell position, subtract the closing buy price from the opening sell price.

This is a movement of 10 pips.

Using the same 10,000-unit position size, one pip is equal to 1 US dollar.

This example shows a positive P&L of 10 US dollars before charges.

A sell position is linked to a lower market price. It does not mean that the market will move lower. It only explains how the position is calculated when the price changes.

What Happens When a Sell Position Moves Higher?

Imagine the sell position opens at 1.0840, but the market later moves higher.

The quote may then show:

The position closes using the buy price of 1.0852.

This is negative 12 pips.

For the same 10,000-unit position, one pip is equal to 1 US dollar.

This example shows a negative P&L of 12 US dollars before charges.

The main rule is simple. A buy position is affected when the market moves higher or lower after it opens. A sell position is affected in the opposite direction.

A USD/JPY P&L Example

JPY currency pairs use a different decimal format.

For many JPY pairs, one pip is 0.01 instead of 0.0001.

Imagine USD/JPY is quoted at:

A person opens a buy position at 156.22.

Later, the quote changes to:

The buy position closes at the sell price of 156.32.

For USD/JPY, this is a movement of 10 pips.

Now imagine the position size is 10,000 units.

The pip value is calculated as:

The price moved by 10 pips.

This example shows a positive P&L of 1,000 Japanese yen before charges.

When the account currency is not Japanese yen, the platform may convert this amount into the account currency. The displayed figure can change because currency conversion rates can change.

How the Spread Affects P&L?

The spread is the difference between the buy price and the sell price.

For example:

The spread is two pips.

A buy position begins at 1.0842, but it closes at the sell price. A sell position begins at 1.0840, but it closes at the buy price.

This is why a newly opened position may show a negative figure immediately after it opens. The gap between the buy price and sell price is already included.

The spread can change depending on the currency pair, market activity, liquidity and the provider’s pricing conditions.

Gross P&L and Net P&L

The calculations above show gross P&L. This means the result before charges.

Net P&L is the final amount after applicable charges are included.

Charges can include commissions, overnight financing charges, currency-conversion charges or other product-related fees.

For example, a position may show a positive P&L of 10 US dollars before charges. If the applicable charges are 2 US dollars, the net P&L becomes 8 US dollars.

The exact charges depend on the product, position size, account type, position duration and provider terms. Always check the product specification and pricing schedule for the instrument you are viewing.

Unrealized and Realized P&L

Unrealized P&L is the amount shown while a position is still open.

It can change as the forex price changes. A position may show a positive amount at one moment and a negative amount later because market prices can move quickly.

Realized P&L is the final result after the position has been closed.

The realized amount can differ from an earlier unrealized figure because the available price may change before the position is closed. Charges, conversion and execution conditions can also affect the final amount.

A Simple Way to Check Forex P&L