Manage your portfolio better by calculating your bitcoin and other crypto profits and losses. Here are 3 ways to analyze the performance of your crypto trades.
If you’re an investor or a trader, it’s a good habit to keep track of the crypto you’ve already bought. Not only will you be able to manage your portfolio better by removing assets performing poorly, you can also change your trading or investing strategies to optimize your overall portfolio performance. Calculating your profit and losses is a great way to monitor your portfolio. Read on to learn how you can do so in three different ways.
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How to Calculate Crypto Trading Profit and Loss
While it may sound complicated, methods to calculate how much you’ve made, i.e. profit, and how much you’ve lost, i.e. loss, can be straightforward and involve simple math. We outline three simple ways to do so below.
1. Transaction-to-transaction
Transaction-to-transaction is a method more suited for active crypto traders. To calculate your profits and losses on a transaction-to-transaction basis, you’ll need to do two things.
Step 1: Calculate the cost price and value of each trade in your local currency.
Step 2: Compare the difference of trade and cost value to determine the profit or loss.
Note: Be sure to include trading fees incurred as part of the cost price.
Formula:
If only one trading pair is involved:
Cost value = original cost of holdings (including trading fees)
Trade value = value of holdings at time of selling
Profit = Trade value - cost value (including trading fees)
If multiple trading pairs are involved, please note the following:
The cost value of the first trade A, is not the same as the cost value of the second trade B. Instead, the new cost value of second trade B will be the trade value of first trade A.
Add all the profits from each trade and deduct all fees incurred.
For example:
*The dates and prices are for illustration purposes only. They are not representative of real prices on the dates mentioned below.
*Note that this example will not be considering trading fees to keep the explanation simple. Traders should, however, take into consideration all trading fees as part of cost value.
1 Jan 2022
You buy 1 BTC for 5,000 USD.
Cost value = 5,000 USD
Holdings: 1 BTC
1 Feb 2022
You then sell the 1 BTC for 30 BNB at a time when the price of a BNB token is 250 USD.
Value of trade = 7,500 USD (30 BNB x 250 USD)
Unrealized Profit = 2,500 USD (trade value of 7,500 USD - cost value of 5,000 USD)
1 March 2022
You then sell the 30 BNB for 5,000 SAND at a time when the price of a SAND token is 1.8 USD.
Note that your new cost value for the following trade will be 7,500 USD as it is the cost of 30 BNB.
Holdings: 5,000 SAND
Value of trade = 9,000 USD (5,000 SAND x 1.8 USD)
Unrealized Profit: 2,500 USD (9,000 USD - 7,500 USD)
Your overall unrealized profit for the first quarter of the year is 5,000 USD (2,500 USD profit + 2,500 USD profit). Remember to take into consideration any trading fees incurred throughout the trades. Keep in mind that the unrealized profit, while valued at 5,000 USD, is subjected to market volatility and will vary according to the price of assets you are holding (in this example, SAND). Your profits will be realized when you sell them for cash. To avoid market volatility and to realize your profits, you should convert your holdings to a stablecoin like BUSD and sell it for cash.
2. Profit/ Loss Year-to-Date (YTD)
Year-to-Date (YTD) simply compares the value of your balances at the start of the year with the end of the year of a calendar year. This particular calculation method is more suitable for long-term crypto investors who HODL.
Note: You'll be using the exchange rates at the end of the year rather than at the time of each transaction.
Example
Assume your balances at the start of the year are:
5,000 USD (1 BTC)
0 USD
Assume your balances at the end of the year are:
0 USD
5,000 SAND
At the end of the year, the price of a SAND token is 2 USD, which means the total value of your portfolio at year-end is 10,000 USD.
Unrealized Profit = 5,000 USD (Portfolio balance at the end of the year - portfolio balance at the start of the year)
*This unrealized profit will not be realized until you convert it into a stablecoin like BUSD and cash it out.
3. Open & closed positions
You can track your performance by looking at your open and closed positions as well. Open positions are trades that have been made when you enter the market, and become closed positions when you make a trade in the opposite direction. For example, if you bought 0.5 BTC, you have an open position. If you sold that 0.5 BTC, it becomes a closed position.
With open positions, you can classify your positions in different ways, including short-term, long-term, value and speculative positions. By organizing your positions into different categories, you should be able to get a clearer overview to track performance based on each category, instead of all your open positions.
For closed positions, you can download them into a spreadsheet and sort profitable trades from the unprofitable ones using the transaction-to-transaction method mentioned earlier.
Start Your Crypto Journey
If you don’t have open or closed positions in the crypto market yet, but are interested in trying out these portfolio tips, you can start building your portfolio with Binance today. Before purchasing any cryptocurrencies, we recommend to DYOR and identify your goals—are you looking to trade crypto in the short-term or grow your portfolio over a longer period of time? These decisions will also help you settle on how you wish to manage your portfolio. Easily learn more about the different types of crypto– NFT Coins, Web 3 Tokens, Metaverse Tokens, DAO Crypto, Stablecoins and Layer 1 Blockchain tokens–on Binance today.
Next, purchase your crypto in 2 simple steps on the Binance exchange.
Step 1: Fund your account
Make a fiat deposit via an e-wallet transfer or bank transfer on Binance. Be sure to check the available fiat channels for desired currencies. See in-depth guide on “ How to Deposit USD via SWIFT”
Optional: Convert the fiat currencies to BUSD or USDT so that you can trade a greater variety of tokens.
Step 2: Buy your crypto
Purchase tokens through a user wallet purchase or directly with credit/debit card.
Conclusion
Tracking trading performance is a fundamental but important habit that can help you become a successful trader. Consider adopting the above calculation methods to grow your portfolio faster. These methods are flexible and can be tailored to your financial goals and trading or investment style. If you’re a day trader, the transaction-to-transaction method may be more suitable for you, while YTD may complement a long-term trader better. Interested? Sign up for an account and build your portfolio with Binance today.
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