How to calculate profits/losses from exchanging balances (non-margin trading)

Profits/losses (P/L) from exchanging balances you own (non-margin trading) are much harder to calculate and keep track of than profits/losses from margin trading

That's because unlike with margin trading, non-margin trading does not require you to place a "closing" trade in the opposite direction of the same pair.

P/L calculation: transaction-to-transaction

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.

Example

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 CAD is 1.357 USD.

• 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:

• Deposits
• Withdrawals
• Margin profits/losses

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.

Example

Assuming the same history as in the previous example, at the start of the year your balances are:

• 5,000 USD

And at the end of the year your balances are:

• 0 USD