There are various ways you might calculate profits/losses from buying and selling currency (without the use of margin):
P/L calculation: transaction-to-transaction
To calculate profits/losses on a transaction-to-transaction basis, you'll need to manually calculate the cost basis and value of each trade in your home currency and compare the difference in value and cost basis to determine the profit or loss.
Remember to count trading fees as part of the cost basis.
Let's say you originally bought 1 XBT for 5,000 USD.
- Cost basis = 5,000 USD (plus any trading fees)
Then you sell the 1 XBT for 40 ETH at a time when the price of ETH is 200 USD.
- Value of trade = 8,000 USD (40 x 200; and this is also your new cost-basis)
- Profit = 3,000 USD (8,000 - 5,000)
Then you sell the 40 ETH for 9,500 CAD at a time when the price of USD is 1.357 CAD.
- Value of trade = 7,000 USD (9,500 / 1.357)
- Cost basis = 8,000 USD
- Loss = 1,000 USD (7,000 - 8,000)
Your overall profit for the year is still 2,000 USD (3,000 profit - 1,000 loss).
P/L calculation: start balances vs end balances
Alternatively, you may try comparing the value of all your balances at the start of the year versus the end of the year. But if you do this, you need to control for:
- Margin profits/losses
- Trading fees
Note: this will give you a different overall profit/loss because you'll be using the exchange rates at the end of the year rather than at the time of each transaction.
Assuming the same history as in the previous example, at the start of the year your balances are:
- 5,000 USD
- 0 CAD
And at the end of the year your balances are:
- 0 USD
- 9,500 CAD
If at the end of the year the price of USD is 1.1176 CAD, then the worth of your balances is 8,500 USD.
Your overall profit is 3,500 USD (8,500 ending worth - 5,000 starting worth).
IMPORTANT: Countries differ on how cryptocurrency transactions, trades and holdings are taxed (if at all) and how they view cryptocurrencies in general (e.g. as money, as property, as a commodity, etc). Please consult a local accountant, tax lawyer and/or government official for advice.