There are various ways you might calculate profits & losses from buying and selling currency (without the use of margin):
Remember to count trading fees as part of the cost basis.
Let's say you originally bought 1 BTC for 5,000 USD.
- Cost basis = 5,000 USD (plus any trading fees)
Then you sell the 1 BTC 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).
- 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 or government official for advice.
The decimal and thousands separators shown in this article may differ from the formats displayed on our trading platforms. Review our article on how we use points and commas for more information.