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How is the profit and loss of the currency circle calculated? Profit and loss calculation methods for three currency circles

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2024-06-11 17:03:49456browse

As an investor, paying close attention to the dynamics of your cryptocurrency holdings is a wise habit. By eliminating underperforming assets, investors can not only optimize portfolio management, but also change trading or investment strategies to make the portfolio better. The overall performance has been improved to a higher level. Therefore, experienced investors usually optimize portfolio management by calculating the profit and loss of the currency circle, but there are still many novices who do not understand how the profit and loss of the currency circle is calculated? At present, there are mainly three types of transactions: transaction by transaction, year-to-date profit and loss, and open positions and closing positions. The editor will explain it in detail below.

How is the profit and loss of the currency circle calculated? Profit and loss calculation methods for three currency circles

#How is the profit and loss of the currency circle calculated?

The profit and loss calculations in the currency circle mainly include three types of transactions, year-to-date (YTD) profit and loss, and open positions and closing positions. Although it sounds complicated, calculating profits (i.e., gains) and losses The method of losing money is very simple and only requires simple mathematical operations.

The following three simple methods can achieve your goals:

1. Transaction by transaction:

Transaction by transaction is more suitable for active cryptocurrency traders. To calculate profit and loss on a trade-by-trade basis, it's usually done in two steps.

Step 1: Calculate the cost price and value of each transaction in local currency.

Step 2: Calculate the difference between transaction value and cost value to determine profit and loss.

Note: The transaction fees generated must be included in the cost price.

Formula:

If only one trading pair is involved:

Cost value = original holding cost (including transaction fees)

Transaction value = The value of the assets held at the time of sale

Profit = transaction value-cost value (including transaction fees)

If multiple trading pairs are involved, please pay attention to the following points:

The cost value of the first transaction A is different from the cost value of the second transaction B. Instead, the new cost value of the second transaction B is the transaction value of the first transaction A.

Add all profits from each transaction and deduct any fees incurred.

Example: Dates and prices are for illustrative purposes only and do not represent actual prices on the following dates. For ease of understanding, this example does not consider transaction fees. However, traders should factor all trading fees into the cost value.

On January 1, 2022, you spent 5,000USD to buy 1BTC.

Cost value=5,000USD

Holding amount: 1BTC

February 1, 2022

Then, when the BNB price is 250USD, you Sell ​​1BTC and buy 30BNB.

Transaction value=7,500USD (30BNBx250USD)

Unrealized profit and loss=2,500USD (Transaction value 7,500USD-cost value 5,000USD)

March 1, 2022

Then, when the price of SAND token is 1.8USD, you sell 30BNB and then buy 5,000SAND.

Please note that the new cost value in the following transaction is 7,500USD, corresponding to a cost of 30BNB.

Holdings: 5,000SAND

Transaction value=9,000USD (5,000SANDx1.8USD)

Unrealized profit and loss: 1,500USD (9,000USD-7,500USD)

Your total unrealized profit and loss in the first quarter of this year is 4,000USD (2,500USD gain + 1,500USD gain). Don’t forget to factor in any transaction fees incurred on the entire transaction. It should be noted that although the value of unrealized profit and loss is 5,000USD, it will be affected by market volatility and change with the price of the asset held (SAND in this case). When you sell them to cash out, you get the profit. In order to avoid market volatility and gain income, you should exchange your holdings for stablecoins such as BUSD and then sell them for cash.

2. Year-to-date (YTD) profit and loss

Year-to-date (YTD) profit and loss is simply calculated as the balance difference between the beginning and the end of the calendar year. This special calculation method is more suitable for cryptocurrency investors who choose to hold for the long term.

Note: The calculation will use the exchange rate at the end of the year, not the immediate exchange rate for each transaction.

Example

Suppose your balance at the beginning of the year is: 5,000USD (1BTC), 0USD; Suppose your balance at the end of the year is: 0USD, 5,000SAND

At the end of the year, The unit price of SAND tokens is 2USD, and the total value of your portfolio at the end of the year is 10,000USD.

Unrealized profit and loss = 5,000USD (portfolio balance at the end of the year - portfolio balance at the beginning of the year)

This kind of unrealized profit and loss can only be realized after the assets are converted into stable coins such as BUSD and sold for cash. can be achieved.

3. Open and closed positions

You can also view your open and closed positions and track your trading performance. Open positions are trades completed at the time of market entry. If an open position is traded in the opposite direction, it becomes a closed position. For example, if you purchased 0.5 BTC, you have an open position. If you sell 0.5 BTC, it becomes a closed position.

For open positions, you can classify them in different ways such as short-term positions, long-term positions, value propositions, and speculative positions. By categorizing your positions, you can clearly and intuitively track the trading performance of different categories and avoid having all open positions "lumped into one lump".

For closing positions, you can download them to a spreadsheet and use the trade-by-trade method described above to classify profitable versus unprofitable trades.

What is the strategy for making steady profits without losing money in the currency circle?

In the currency circle, there is no strategy for making sure profits without losing money, because the volatility of the digital currency market is extremely high, and any investment is risky. However, by adopting some reasonable strategies and measures, investors can reduce risks and increase the success rate of investments. The following are some suggestions:

1. Diversified investment:

Don’t invest all your funds in one digital currency project. By diversifying your investment into different projects, you can reduce the impact of a single project. risks of.

2. Long-term holding:

The digital currency market has large short-term fluctuations, but the long-term trend is relatively stable. For long-term investors, holding high-quality digital currency projects and waiting for their value to be released is an effective strategy to achieve steady returns.

3. Risk management:

In currency investment, risk management is crucial. Investors need to set reasonable stop-loss points to limit potential losses; at the same time, they also need to maintain sensitivity to market dynamics and adjust their investment portfolios in a timely manner.

4. Understand the market characteristics:

Before investing in the currency circle, investors need to have an in-depth understanding of the market characteristics, including the volatility of digital currencies, market trends, etc., which will help make wise decisions. investment decisions.

5. Technical analysis:

Learning and mastering the basic knowledge of technical analysis can help investors better understand market dynamics and make more accurate investment decisions.

6. Stay calm:

It is very important to stay calm and patient in the currency circle. Don't make impulsive trading decisions because of short-term market fluctuations.

7. Avoid chasing highs:

Don’t chase highs to buy digital currencies. Instead, you should wait for a reasonable price range to buy. Maintaining a good attitude is the key to investing in the currency circle. Don't lose control of your emotions because of temporary losses, but stick to your investment strategies and plans.

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