How To Calculate Crypto Profit And Loss?
In the crypto market, some traders lose significant money in their portfolios, and some make a lot of money. Those who know how to calculate if they have made a profit or loss while trading cryptocurrencies are more likely to trade successfully. This, however, is what most of the newbie traders who jump into the bandwagon of crypto investing fail to learn. An easier and more convenient way to do this is with a crypto profit calculator. There are many ways a crypto trader can calculate if a trade is running on profit or loss, and below are some effective methods to do so.
What Are Profit And Loss In Crypto Trading?
It is not always that cryptocurrency traders make money while trading; sometimes, they are trading very much below the price they bought an asset. With a good explanation, even someone who began trading cryptocurrencies today will easily understand what profit and loss mean. To grasp this, an illustration involving a cryptocurrency trade will be used. Assuming you purchased 1 BNB about five months ago at $750, that is your original buying price. If the price of BNB should rise to $1050, you will determine your profit or loss by subtracting your initial buying price from the current market price.
To subtract using the illustration, $1050 - $750 = $300.
The summary of this is that you will make a profit of $300 if you sell your assets at that moment. The description above is a fundamental way crypto traders can calculate if they are making a profit or loss. Trading multiple cryptocurrencies will require you to make use of other methods.
How To Calculate Crypto Profit And Loss
Subtracting The Breakeven Price From The Price You Sold It
An easy way, which most newbie crypto traders make use of to calculate their profit and loss, is by subtracting the breakeven price from the price you sold it. Let's say you purchased Solana (SOL) at $450, then after a while, you sold it for $1450, making a profit of $1000. Subtracting the selling off-price $1450 from the initial price you bought it, $450, is automatically your profit margin. Vice versa, to determine if you made some losses, you also subtract the price at which you bought it from your selling price. Using the example above, doing that will simply give you a loss of $1000 using the example above.
Make Use Of Multiplication To Calculate The Profit Percentage
For crypto traders that are advanced in trading cryptocurrencies, using this method is essential as most Futures and spot trades can be easily calculated with this. Note that your breakeven price is essential when using multiplication to find the profit percentage. You multiply the breakeven price, otherwise known as the entry price, by a percentage corresponding to it. An example is when you buy crypto, say Solana (SOL), at an entry price of $4 to make a profit of 10%. So to get your profit margin, you need to multiply $4 (your entry price) by the percentage profit of 10%. So $4 multiplied by 1.1 will give you the exit price (your selling price). You would get $4.4 if you multiply this, and when you minus $4 (the entry price) from $4.4 (the exit price, you have a profit of $0.4.
Make Use Of a Spreadsheet
Using a spreadsheet package such as Google Sheet or Microsoft is among the easiest ways to calculate a crypto profit and loss. All you need to do is input the data of the traded cryptocurrencies into the spreadsheet using the correct rows and columns. This is how the cryptocurrencies you traded are arranged in the spreadsheet. The name of the cryptocurrency, the number of cryptocurrencies that were bought, the entry price, the exit price, and the date at which the trade occurred.
Note, however, that data is inputted manually to use Google Sheets or other spreadsheets. You need to be updated with data on all the happenings in the crypto market. If a lot of cryptocurrencies are involved, it can become complex to calculate each one of them. A slight inaccuracy during data entry can mess up the whole calculation except if corrected. A spreadsheet is a good option for beginners not yet trading multiple cryptocurrencies at a time.
Using Unrealized Profit
Unpredictability and volatility characterize the crypto market, and most crypto traders are sometimes irritated by this. However, irritation leads to impatience, increasing the probability of making an error when trading. If you bought Solana at an entry price of $230 and then the cost of the crypto asset moved to $270, you would have made a profit of $40.
But in this case, it can't be considered profit except if you sell that crypto-asset immediately at that price. The same thing applies to assuming the price of Solana went down to $120; you would have lost $110. But then, so long as you haven't liquidated your asset, you haven't really made a profit or loss. Calculating profit and loss using unrealized gain is using what would have been the price of a crypto asset to determine if you are making a profit or loss.
Make Use of a Crypto Profit Calculator
Using all the above methods is excellent, but a crypto calculator makes everything effective and efficient. Many crypto brands offer cryptocurrency profit and loss calculators online. CoinStat's profit calculator is available to users online and can be used to calculate returns, profit and loss, and profit margins. With numerous alternatives online, it is straightforward to find companies that provide crypto profit calculators by offering free trials or an affordable subscription.
Those who have been in the crypto trading business for a long time know that constant profit and loss calculation is essential. For every trade in the crypto market, two options are available, and they will either be successful (profit) or unsuccessful (loss). So simply put, each time you sell a crypto asset above the price you purchased it, you are making a profit. And whenever your selling price is lower than your buying price, you lose the trade.