Ways To Manage Your Crypto With Profit and Loss Calculations

This blog will guide you how to maximize the profit and Calculate your bitcoin and other crypto gains and losses to better manage your portfolio. Here are three methods for evaluating the performance of your cryptocurrency 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. To gain more exposure in trading try mock trading at India’s very own marketplace CoinGabbar.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.

There are various factors that govern the prices of Cryptocurrency and getting the best prices for your assets which are invested in crypto with the intention of making the most profit and making trades and evaluating value effectively. Here we will assess them all while making the most of the resources. An aftermath of what to do when the prices heavily affect the assets bought and invested upon.

How to Calculate Profit and Loss in Crypto Trading

While it might appear hard, calculating how much money you've earned (profit) and how much money you've lost (loss) may be easy and use basic math. We'll show you how to accomplish it in three easy steps below.

1. Transaction-to-transaction (transaction-to-transaction)

The transaction-to-transaction strategy is better suited to aggressive cryptocurrency traders. You'll need to perform two things to compute your gains and losses on a transaction-by-transaction basis.

Step 1: In your native currency, calculate the cost price and value of each deal.

Step 2: Calculate the profit or loss by comparing the difference between the trade and cost values.

Step 3: Try to predict or to assess the trading fees by analysis of prices, so as to calculate total prices and expenses being charged to you.

For example: * The dates and pricing shown are purely for demonstration purposes. They do not reflect actual prices on the dates specified below.

*To keep things simple, we're not going to include trading costs in this example. Traders should, however, include all trading costs in their cost value calculation.

1st of July 2022:

You pay 5,000 USD for 1 BTC.

5,000 USD is the cost value.

1 bitcoin (BTC) in possession

1st of August 2022:

The 1 BTC is then sold for 30 BNB at a time when a BNB token is worth 250 USD.

The transaction value is 7,500 USD (30 BNB x 250 USD).

Profit Unrealized = 2,500 USD (trade value of 7,500 USD - cost value of 5,000 USD)

1st of September 2022:

You then sell the 30 BNB for 5,000 SAND at a price of 1.8 USD for a SAND token.

Due to the cost of 30 BNB, your new cost value for the next deal will be 7,500 USD.

5,000 SAND IN HOLDINGS

9,000 USD in trade value (5,000 SAND x 1.8 USD)

Profit Unrealized: 2,500 USD (9,000 USD - 7,500 USD)

For the first quarter of the year, your total unrealized profit is 5,000 USD (2,500 USD profit + 2,500 USD profit). Remember to include in any trading costs you may have incurred along the deals. Keep in mind that, while the unrealized profit is valued at 5,000 USD, it is subject to market volatility and will fluctuate depending on the price of the stock.

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. 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.

Since trading in Crypto is highly risky and speculative, please take assistance of a seasoned Crypto Trader or Financial advisor before practicing starting Trading, CoinGabbar is not responsible for any losses.