Different equations are used to calculate the exact profit or loss, depending on the currencies:

> Direct Currencies (USD is the quote currency)

Suppose we buy GBP against USD. The rate is 1.4917 / 1.4918

We buy one lot of 100’000 GBP at 1.4918. We use the “ask” rate as we are buying the base currency (GBP).

Few days later the pound appreciates versus the US Dollar, resulting to a new rate:
1.4925 / 1.4926

So we decide to close our trade. Consequently we sell our lot of 100’000 USD at 1.4925, using the “bid” price as we are now selling the base currency (GBP).

The result of the trade is the difference between 1.4925 (bid rate) and 1.4918 (ask rate), 0.0007 in our case.

As we bought a lot of 100’000 units, we still have to multiply this result by 100’000 = 70 USD.

The following equation was used to get our result:

Profit/Loss = (Sell Price – Buy Price) x Traded Amount

Note:

This equation also applies to cross currencies (not using USD). However, if the result is denominated in a direct currency, in order to get the final result in US Dollars, we will multiply it by the exchange rate for that currency against US Dollar at the moment when the trade was closed.

If the result is denominated in an indirect currency, we divide it by the exchange rate of the currency against the US Dollar at the moment the trade was closed in order to get the final result in US dollars.


> Indirect Currencies (USD is the base currency)

Suppose we buy USD against CAD. The rate is 1.2419 / 1.2420.

We buy one lot of 100’000 USD at 1.2420. We use the “ask” rate as we are buying the base currency (USD).

Few days later the US Dollar appreciates against the Canadian Dollar to a new rate of
1.2449 / 1.2450.

Should we decide to close our trade, we will sell our lot of 100’000 USD at 1.2449, using the “bid” price, as we are now selling the base currency (USD).

The result of the trade is the difference between 1.2449 (bid rate) and 1.2420 (ask rate), here 0.0029.

To calculate its value in US Dollars we have to divide this amount by the closing rate (here 1.2449) = 0.0023295

As we bought a lot of 100’000 units, we still have to multiply this result by 100’000 = 232.95 USD.


The following equation was used:

Profit/Loss = (Sell Price – Buy Price) / Closing Rate x Traded Amount