Profit and Loss Formula
P&L = (Exit Price − Entry Price) × Contract Size × Number of Lots × Conversion Rate for buy orders, and with the opposite sign for sell orders. Trading costs—spread, commission, and swap—are then deducted.
Practical Example
Buying 1 lot of EUR/USD at 1.0850 and closing at 1.0890 yields 40 pips × $10 = $400 before costs. With a 1.2 pip spread ($12) and a $7 commission, the net profit comes to $381.
Breakeven Price
The breakeven price is the exact market rate where the trade covers all incurred trading costs. For a long position, it sits slightly above the entry price to offset those expenses.
Why Does Actual Profit Differ from Expected Profit?
- Slippage during order execution.
- Spread widening around high-impact news.
- Overnight swap financing charges when holding positions for more than one day.
- Currency conversion rates if your trading account operates in a different base currency.