It’s already standard procedure for most forex brokers to do the calculations of profit and loss for you. If they don’t do it themselves, they often use a trading platform that performs the calculations routinely.

Nevertheless, it’s still advantageous for you to learn how to calculate loss and profit on forex yourself. For one thing, a little extra knowledge never does you any harm and for another, it’s a pretty good way to determine your broker’s honesty.

Calculating your profit in forex is actually quite simple because there are only two very important formulas for you to memorize. Assuming that you’re using USD as the first currency in your currency pair – the base currency – you can calculate your profit by multiplying the units traded by the price change, and then dividing the product by the exit price.

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On the other hand, if you’re using USD or any currency for that matter as the second currency in your currency pair – the quote currency – you can calculate your profit by multiplying the change of the price by the number of units traded. You just plug in the values, do the multiplication and division, and there you have it. If the resulting number is positive, then congratulate yourself for just having made a profit. If it’s negative, though, you might want to change your strategy because you just lost money.

To apply what you’ve just learned, assume a situation where your broker has a 2% margin. For example, you’re trading USD/JPY – that is, you have USD as your base currency – at 112.77 and you bought 100,000 units. If the price goes up to 112.94, you’ve just made yourself 17 cents. Plug the numbers into the first formula and you should get something that looks like (100,000 x 0.17) / 112.94 for a resulting profit of $150.52.

Don’t forget that situation just yet. If you still have the same currency pair and the same number of units but the price went down to 112.59 – a decline of 18 cents – you obviously suffer a loss. To find out how much, you would have to make an equation that looks something like (100,000 x (-0.18)) / 112.59. That gives you a total of $159.87 in losses.

Putting USD as your quote currency and into the other position on the currency pair will have you using a different formula. Say you have a situation where you’re trading EUR/USD at 1.2647/8. If you decided to buy euros and then sold them later on for 1.2671/2, you made yourself a profit. Your equation would then look like (100,000 x 0.0023), which equals $230 in profit.

Even if you have a broker or a trading platform to do the calculation of forex profits and losses and profits for you, it’s still a good idea to do audits and calculations permanently. It’s very possible that others will err when calculating for your profits or your losses, and you can’t trust anybody but yourself to find out those mistakes.