Thursday, 01 December 2022

How to Calculate Profit and Loss from Crypto Trading

Written by  Feb 25, 2022

Just like any other business, trading crypto is also a business. So if you wish to be truly good at crypto trading, then you have to calculate profit and loss from it. But not so many newbie crypto traders are aware of how to calculate profit and loss from crypto trading. If the same goes for you, then I am here to help you out.

In this post, I will guide you with how much you have made and how much you lost in crypto trading. So you can balance your portfolio.

So here we go:

A Piece Of Advice

Before we head into the article, here is a little piece of advice. Most of the newbie crypto traders lose money without making any profits. There are a few reasons why it happens.

Like most new investors, they invest in coins which have no real use case. As a result, the value of the coin doesn’t really increase over a period of time.

Another reason could be that they panic sell when they see the market going down a bit.

Even many newbie traders get started with their investing journey through trading with Binance Futures, without knowing what exactly it is. As a result, they end up losing a ton of money.

However, the thumb rule of trading is to never sell your assets at a loss. Also, make sure to invest the money you can afford to lose. This way only, you will be able to make a profit out of crypto. Also, make sure to note down both your losses and profits.

How Profit and Loss is calculated from Crypto Trading?

1.Subtract the Selling Price from the Cost Price

Subtracting the selling price from the cost price is the simplest way to calculate profits and losses. All you have to do is remove/subtract the amount you sold the crypto from the amount you bought it for.

For instance, if you bought BNB for $130 USD and sold it for $200. Then, in this case, you are removing the cost price or the price you bought BNB from the selling price, which is $200. And now there is a $70 gap which is your profit.

You can use the same formula to calculate your losses. For instance, if you bought BNB at $130 and sold it at $100, then there is a $30 gap which is your loss.

2.Use Unrealized Profit

Often crypto traders get impatient and decide to take profits and get out of the market even when the market is going up. Or crypto traders don’t sell their assets when they should. Since the crypto market is volatile and anything can happen. Hence it is important that you keep checking the market.

However, talking about the calculation in this case, if you bought BNB at $130 and it jumped to $150, you already made a profit of $20.

But the thing is, you haven’t sold your assets yet. And the price of BNB can drop a bit or go below the price you bought the coin at. For instance, if you bought BNB at $130 and the current trading price is $100, you lost $30. However, as long as you don’t really sell your funds, you are not really in a loss.

3. Multiply to Get the Percentage Profit

A majority of crypto traders prefer percentage to calculate their profit and loss. To do so, you can calculate your profits in crypto by multiplying for the percentage increase.

Here is how you can do so:

You need to multiply the price you bought the crypto at(entry price) by the corresponding percentage expression. The percentage profits between 10% and 50% are expressed this way:

For instance, if you bought BNB at its entry price of $2, you want to make just 10% of the trade and sell your assets.

In this case, you have to multiply your entry price by the corresponding percentage profit of 10%.

So it would be $2, your entry price multiplied by 1.1 to get your exit price. So the value of your assets would be $2.2 now minus the entry price, and you made a profit of $0.2.

The thumb rule is to add the number 1 every time you want to multiply by a hundred.

4. Use a Spreadsheet

Using a spreadsheet for calculating profit and losses would be the wisest idea. You can organize everything about the profits and losses using simple spreadsheet formulas.

You can organize your spreadsheet into these columns:

  • Name of the cryptocurrencies you have bought.
  • How much of the assets do you want?
  • Your entry or buying price for the coins.
  • At what price did you sell your cryptocurrencies?
  • The date you traded your coins.

For this, you can use Google Sheets which can fetch the live market data. As a result, you will get to know whether you have made money or lost money.

5. Use A Cryptocurrency Calculator

Using a spreadsheet is great. But it can be too complicated to fill in all the formulas and manage them.

Instead, you can use a cryptocurrency calculator. There are so many online crypto calculators available out there which let you check how much you have earned and the amount you lost from crypto trading. One such online calculator is btc.feh.im.

Also, these calculators make it super easy for us to check the profits and losses we have made.

FInal Words:

So that was a quick guide on how to calculate profit and loss from crypto trading. In the end, the only advice I would give is to note down your entry price and exit price. This way, you can easily calculate profit and losses with simple plus and minus formulas.

Also, you need to calculate how much trading fee you have paid and minus that from your profit. The trading fee applies to both your entry trade and exit trade.

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