<p>The simplest way to track profits and losses from trading is to mark your holdings to market in your local currency each day. That is, each day, value all your holdings in your local currency at their market price and sum them. If that number goes up, you made a profit on your combination of holding and trading currencies. If that number goes down, you took a loss.</p>

<p>There are various benchmarks you can compare that to. One is your total investment, which you should also value at market price as you invest it. So if you put in one Bitcoin when Bitcoins are worth $750, you add $750 to your total investment. Another is how much you would have if you had simply held Bitcoins instead of trading. Another possibility is to compare against other types of investments such as stocks or bonds.</p>

<p>Note that holding and trading crypto-currencies can be profitable but is extremely risky.</p>

CC BY-SA 3.0
2013-12-19T23:11:56.120Z
I'm really more interested in computing trade to trade P&L.  See edit.
user6972
CC BY-SA 3.0
2013-12-20T11:11:41.853Z
Just mark to market the thing you traded and mark to market the thing you received in trade. That's the trade P&L. This can, however, give a deceptively high value because market makers can easily be forced to hold a currency only when it's dropping, so you can't ignore your currency holding losses.
David Schwartz
CC BY-SA 3.0
2013-12-21T16:58:17.820Z
My question is specific to how the calculations are done.  I understand the concepts however my calculations don't seem to work out quite right.
user6972
CC BY-SA 3.0
2013-12-19T19:37:51.003Z
2013-12-19T19:37:51.003Z
David Schwartz
<p>It really depends on what you call profit. If having more X means you made a profit, denominate in X!</p>

<p>If you want to compare two trades you generally want to see if you ended up with more than you went in with. Did a buy result in a better sale, or vise versa.</p>

<p>X can be loafs of bread, cars or preferably other currency.</p>

<p>Ultimately it is about increasing total wealth (I assume). That means you have to measure wealth. How you do that is up to you!</p>

<p>To be more direct: Pick either of those, or their value to a third currency. In the end what matters is how much you can buy with it, so picking a very stable third item is a smart move. If you care just about boosting these two numbers you can express your total value in one of the two.</p>

CC BY-SA 3.0
2013-12-22T01:29:53.573Z
Either way my numbers don't seem to be correct.
user6972
CC BY-SA 3.0
2013-12-22T00:11:43.967Z
2013-12-22T00:11:43.967Z
Lodewijk
<p>I can't seem to wrap my head around this.  Let's say we have these fake trades between two currencies</p>

<pre><code>        C1  C2      Rate    dPIP    Trade   Value C1    Value C2
Day 1   1   0       10      0       buy      1          10
Day 2   0   10      10      0       sell     1          10
Day 3   10  0        1     -9       buy     10          10
Day 4   0   1000    100    99       sell    10          1000
Day 5   5   0       200   100       buy      5          1000
</code></pre>

<p>Day 2 you decide to short and overnight it crashes to 1 on Day 3.  So you buy.  Your holdings for Currency 1 (C1) go up 10x.  But the value of your holdings doesn't change.  Likewise you decide to short on Day 4 after seeing a 100x jump.  On Day 5 you get cold feet and decide you sold too soon and buy in again at 2x at a loss.</p>

<p>How would you compute the running profits and losses (and which currency should be referenced)?  For Example on Day 3 you made 9 of C1.  Day 4: 990 of C2, Day 5: you lost 5 of C1.  What is the right way to track the P&amp;L because they are relative to each other.  </p>

<p>And what is the overall yield?  In the end of it all you went from C1=1 to C1=5 or in terms of C2...C2=10 to C2=1000.</p>

<p>EDIT:  I've looked that this some more.  If I look the change in C2 values during sales and the change in C1 values during buys I think I get the trade-trade yield.  Does this look correct?  Could then be summed to show the accumulative yield?</p>

<p>Example C1 yield (2nd buy) Yield=((10-1)/1)*100 = 900%</p>

<pre><code>        C1  C2      Rate    dPIP    Trade   Value C1    Value C2    Yield %
Day 1   1   0       10      0       buy      1          10
Day 2   0   10      10      0       sell     1          10            0
Day 3   10  0        1     -9       buy     10          10          900
Day 4   0   1000    100    99       sell    10          1000       9900
Day 5   5   0       200   100       buy      5          1000        -50
</code></pre>

<p>So if you add up the yields you get 900+9900-50=10750%, but if you look at the yield on C1 it is 500% vs C2 at 1000%.  Obviously I'm not doing something right.</p>

<trading><money>
How to compute profit and loss with currency trading?
user6972
# How to compute profit and loss with currency trading?

(Asked by: username_0 on 2013-12-19)

I can't seem to wrap my head around this. Let's say we have these fake trades between two currencies

```
        C1  C2      Rate    dPIP    Trade   Value C1    Value C2
Day 1   1   0       10      0       buy      1          10
Day 2   0   10      10      0       sell     1          10
Day 3   10  0        1     -9       buy     10          10
Day 4   0   1000    100    99       sell    10          1000
Day 5   5   0       200   100       buy      5          1000

```

Day 2 you decide to short and overnight it crashes to 1 on Day 3. So you buy. Your holdings for Currency 1 (C1) go up 10x. But the value of your holdings doesn't change. Likewise you decide to short on Day 4 after seeing a 100x jump. On Day 5 you get cold feet and decide you sold too soon and buy in again at 2x at a loss.

How would you compute the running profits and losses (and which currency should be referenced)? For Example on Day 3 you made 9 of C1. Day 4: 990 of C2, Day 5: you lost 5 of C1. What is the right way to track the P&L because they are relative to each other.

And what is the overall yield? In the end of it all you went from C1=1 to C1=5 or in terms of C2...C2=10 to C2=1000.

EDIT: I've looked that this some more. If I look the change in C2 values during sales and the change in C1 values during buys I think I get the trade-trade yield. Does this look correct? Could then be summed to show the accumulative yield?

Example C1 yield (2nd buy) Yield=((10-1)/1)\*100 = 900%

```
        C1  C2      Rate    dPIP    Trade   Value C1    Value C2    Yield %
Day 1   1   0       10      0       buy      1          10
Day 2   0   10      10      0       sell     1          10            0
Day 3   10  0        1     -9       buy     10          10          900
Day 4   0   1000    100    99       sell    10          1000       9900
Day 5   5   0       200   100       buy      5          1000        -50

```

So if you add up the yields you get 900+9900-50=10750%, but if you look at the yield on C1 it is 500% vs C2 at 1000%. Obviously I'm not doing something right.

**Tags:** trading, money


---

## 2 answers

### Answer by username_1 on 2013-12-19. Score: 1

The simplest way to track profits and losses from trading is to mark your holdings to market in your local currency each day. That is, each day, value all your holdings in your local currency at their market price and sum them. If that number goes up, you made a profit on your combination of holding and trading currencies. If that number goes down, you took a loss.

There are various benchmarks you can compare that to. One is your total investment, which you should also value at market price as you invest it. So if you put in one Bitcoin when Bitcoins are worth $750, you add $750 to your total investment. Another is how much you would have if you had simply held Bitcoins instead of trading. Another possibility is to compare against other types of investments such as stocks or bonds.

Note that holding and trading crypto-currencies can be profitable but is extremely risky.

> **Comments:**
> **username_0**: I'm really more interested in computing trade to trade P&L.  See edit.  
> **username_1**: Just mark to market the thing you traded and mark to market the thing you received in trade. That's the trade P&L. This can, however, give a deceptively high value because market makers can easily be forced to hold a currency only when it's dropping, so you can't ignore your currency holding losses.  
> **username_0**: My question is specific to how the calculations are done.  I understand the concepts however my calculations don't seem to work out quite right.  

---

### Answer by username_2 on 2013-12-22. Score: 0

It really depends on what you call profit. If having more X means you made a profit, denominate in X!

If you want to compare two trades you generally want to see if you ended up with more than you went in with. Did a buy result in a better sale, or vise versa.

X can be loafs of bread, cars or preferably other currency.

Ultimately it is about increasing total wealth (I assume). That means you have to measure wealth. How you do that is up to you!

To be more direct: Pick either of those, or their value to a third currency. In the end what matters is how much you can buy with it, so picking a very stable third item is a smart move. If you care just about boosting these two numbers you can express your total value in one of the two.

> **Comments:**
> **username_0**: Either way my numbers don't seem to be correct.  

---

