Profit and Loss Calculation
Formula Calculations
Profit and Loss Formula
Profit and Loss = [ ( Selling Price – Buying Price ) x Contract Unit x Number of Lots ] – Commission ± Interest = [ ( Spread x Tick Value ) x Number of Lots ] – Commission ± Interest
Spread Formula
( Selling Price – Buying Price ) / Tick Size
Tick Value Formula
Contract Unit ( Lot Size ) x Tick Size
Interest Formula
(Direct Currency Pair) | Interest Rate x Opening Price x Contract Unit x Number of Lots x Number of Days Held / 360
(Cross Currency Pair) | Interest Rate x Opening Price x Contract Unit x Number of Lots x Number of Days Held / 360 / Daily Closing Price of the Second Currency
Example Illustration
A client buys 2 lots of GBP/USD at a buying price of 1.75050 USD, with a margin of 1750.5 USD. The daily closing price is 1.75100, and the client closes the 2 lots of GBP/USD at 1.75400 USD the next day. The profit from this foreign exchange transaction is:
1.75400 ( Selling Price ) – 1.75050 ( Buying Price ) = 0.00350 = 350 pips ( Profit )
Converting the above profit or loss into USD:
350 ( pips ) x 200,000 ( Contract Unit ) x 0.00001 ( Tick Size ) = $700 ( Profit )
Commission: 50 ( USD / Lot ) x 2 = $100 ( Commission )
Interest: Buy: -3% Sell: 0%
3% x 1.75050 x 100,000 x 2 x 1 / 360 / 1.75030 = 16.6686 ( Interest )
Profit and Loss: 700 - 100 - 16.6686 = 583.3314 ( Net Profit )
