To trade CFD instruments professionally, understanding how profit and loss (P&L) is calculated is essential. It is not just about reading numbers on the trading screen—accurate calculation is a core part of risk management.
Knowing how to calculate profit and loss in advance helps traders choose the appropriate lot size, control risk exposure, and plan trading strategies more effectively.
Profit and Loss Calculation Formula and Steps
Profit and loss calculation in CFD trading consists of three main steps, as outlined below:
| Step | Formula | Explanation |
|---|---|---|
| 1. Price Difference | (Open Price – Close Price) × (10 ^ Digits) | Calculates price movement in points or pips |
| 2. Pip Value | ((Contract Size × Lot Size) × (10 ^ –Digits)) ÷ Exchange Rate | Determines the value of each pip in account currency |
| 3. Final Profit / Loss | Pip Value × Price Difference | Final result shown in the trading account currency |
Profit and Loss Calculation Examples
Example
Example 1: Major Currency Pair (GBPUSD CFD – Buy Order)
Order: Buy 0.01 lot
Open Price: 1.35400
Close Price: 1.35443
Calculation:
Price difference = 43 points × Pip Value ($0.01)
Result:
Profit = $0.43
Example 2: Minor Currency Pair (EURCAD CFD – Buy Order)
Order: Buy 0.01 lot
Open Price: 1.48452
Close Price: 1.48431
Calculation:
Price difference = –21 points × Pip Value ($0.00729)
Result:
Loss = –$0.15
Example 3: Stock Index Trading (UK100 CFD – Sell Order)
Order: Sell 0.1 lot
Open Price: 7542.20
Close Price: 7545.50
Calculation:
Price difference = –330 points (price increased against Sell position) × Pip Value ($0.00108)
Result:
Loss = –$0.35
Useful Tip
To simplify calculations and save time, traders are encouraged to use the IUX Trading Calculator, which provides fast and accurate results based on real-time market conditions.