When trading CFDs (Contracts for Difference), it’s essential to understand how to calculate your profit or loss (P/L). This helps you evaluate your performance and make more informed decisions for future trades.
Long vs. Short: How the Formula Works
The calculation depends on whether you’ve opened a long (buy) or short (sell) position:
For
long positions
(buy), the formula is:
Profit/Loss = (Closing Price – Opening Price) × Lots × Contract Size
For
short positions
(sell), reverse the direction:
Profit/Loss = (Opening Price – Closing Price) × Lots × Contract Size
Example
If you buy 2 lots of a CFD at $1.2000 and sell it at $1.2100, with a contract size of 100,000 units:
(1.2100 – 1.2000) × 2 × 100,000 = $2,000 profit
For a short position, you simply invert the price difference.
Don't Forget Additional Costs
Your final result should also take into account commissions, swap fees, and any other trading costs, which can reduce your overall profit or increase your loss.