What Is P/L & How Is It Calculated in Forex Trading?
How do you determine if you are using a proper strategy for forex trading? You need to start using the profit-loss (P/L) ratio.


Updated October 5, 2023.

Although it can be potentially profitable when you know what you are doing, forex can also be a risky market to participate in, making it critical to understand what P/L is and how it is calculated in forex trading.
P/L means profit and loss, and the P/L ratio functions as a scorecard for active traders. Additionally, realized (profit or loss in your closed positions) and unrealized P/L (profit or loss held in your current open trades) must also be considered.
For example, if you were to close out your USD/CAD, EUR/CHF, and GBP/JPY positions, and you enjoyed a winning average of $75 per trade and an average loss of $25, your P/L ratio would be 3:1.
How to Calculate P/L in Forex
To determine your P/L ratio, you must calculate the average profit on your winning trades divided by the average loss on your losing trades over a given period:
- P/L ratio= Winning trades over (X) period / Losing trades over (X) period
Use these P/L formulas to calculate the profit or loss for your current open trades:
- Buy formula = (Current rate - Open rate) x Units x USD exchange rate
- Sell formula = (Open rate - Current rate) x Units x USD exchange rate
You can also calculate your P/L for your long and short positions from these formulas.
P/L does not have to be calculated manually as there are automated solutions available. However, it remains important to understand how the calculation works and which factors influence it.
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