How do you calculate profit and loss on a forex trade?

To calculate P/L, multiply your trade's pip value by the number of pips gained or lost, then convert the result into your account currency if the quote currency differs. Pips gained come from the difference between your entry and exit prices; the sign depends on whether you bought or sold.

How many pips did you gain or lose?

Subtract entry from exit (for a buy) — the difference is your pips. Buy EUR/USD at 1.0850, sell at 1.0900: that's 0.0050, or 50 pips. For JPY pairs the pip is the 2nd decimal, so selling GBP/JPY at 152.35 and buying back at 151.85 is 0.50, or 50 pips. If you sold instead of bought, flip the sign.

What's each pip worth?

Pip value scales with lot size and is measured in the quote currency:

• Standard lot (100,000): ~$10/pip on EUR/USD
• Mini lot (10,000): ~$1 · Micro lot (1,000): ~$0.10

If the quote currency isn't your account currency, convert it at the current rate.

A worked example

USD account, buy 1 standard lot of EUR/USD (illustrative, not a prediction):

• Entry 1.0850 → Exit 1.0900 = 50 pips
• Pip value (EUR/USD, 1 lot) = $10; quote is USD, so no conversion
• P/L = 50 × $10 = $500 profit

A sell that moved the same distance against you would be a $500 loss.

What's the most common beginner mistake?

Forgetting the currency conversion when your account currency differs from the quote currency. Trade GBP/JPY on a USD account and your P/L lands in yen first — you must convert it back to USD at the current rate to know your real result. Skip that step and your reported profit won't match your actual balance change.