How to Calculate Profit and Loss on a Trade
Knowing your exact profit or loss on a trade sounds trivial — price went up, you made money — but commissions, fees, and direction (long vs short) trip up more traders than you'd think. Getting it right matters for tax records, performance tracking, and honest self-assessment.
This guide covers the simple P&L formula, how shorts differ from longs, and why net (after-fee) numbers are the only ones that matter.
The basic profit and loss formula
For a long trade (you buy, hoping price rises): Profit = (Exit Price − Entry Price) × Quantity − Fees. If you buy 100 shares at $50 and sell at $55 with $10 total commission, your profit is (55 − 50) × 100 − 10 = $490.
The quantity scales everything: the same $5 move is worth $500 on 100 shares but $5,000 on 1,000 shares. That's why position size, not just the price move, drives your results.
Short trades flip the direction
When you short (sell first, hoping to buy back cheaper), profit comes from price falling. The formula becomes: Profit = (Entry Price − Exit Price) × Quantity − Fees. Short 100 shares at $55 and cover at $50 with $10 fees: (55 − 50) × 100 − 10 = $490 profit.
If the price rises instead, the same formula returns a negative number — your loss. Shorting also carries borrowing costs and, in theory, unlimited risk if price keeps climbing, so risk controls matter even more.
Always use net, after-fee numbers
Gross profit ignores the cost of trading; net profit subtracts every commission, spread, and fee. For active traders these costs add up fast and can turn an apparently winning system into a losing one. Track net P&L, and know your break-even — the price your trade must reach just to cover costs — before you enter.
Turn P&L into better decisions
Reviewing P&L per trade reveals patterns your gut hides: maybe your winners are small and losers large (a risk/reward problem), or fees are eating scalping profits. Pair P&L with your planned risk on each trade to see whether you're actually following your plan.
Key takeaways
- →Long P&L = (Exit − Entry) × Quantity − Fees.
- →Short P&L = (Entry − Exit) × Quantity − Fees.
- →Position size scales every dollar of profit and loss.
- →Only net, after-fee numbers reflect your real result.
Frequently asked questions
How do I calculate profit on a trade?+
Multiply the price change by your quantity, then subtract all fees. For a long trade: (exit − entry) × shares − fees. For a short: (entry − exit) × shares − fees.
Should I include fees in my P&L?+
Always. Gross P&L overstates your performance. Commissions, spreads, swaps and other fees come straight out of your result, and for frequent traders they're often the difference between a profitable and an unprofitable strategy.
How is short-trade profit different?+
A short profits when price falls, so you subtract the exit from the entry instead of the other way around. Everything else — quantity scaling and fee deduction — works the same as a long trade.
Calculators in this guide
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For educational purposes only. Not financial advice.