How Do You Calculate Your Cryptocurrency Portfolio’s Gains and Losses?
It takes a solid grasp of the arithmetic to determine your bitcoin trading profit and loss. Additionally, keep in mind that trading cryptocurrencies is mostly done to make money. It’s a good idea to keep track of your profits and losses to maintain a healthy portfolio.
How do you really go about implementing this, though?
Calculating profit and loss is one of the tasks that traders find the most challenging. However, because we’ve previously figured out the specifics, it doesn’t have to be challenging. If you just follow the advice in this post, you’ll get the best outcomes for buying cryptos and earning the desired profits.
Numerous bitcoin speculators experience more losses than gains. Possible contributing factors include trading coins with little practical use and neglecting to cash out earnings in a timely manner. The general rule is: always sell for more than you paid. When you start using profit and loss strategies in the bitcoin market, make sure to keep this in mind.
Methods for Estimating and Figuring Out Profit and Loss in a Business
You may start calculating an estimate of your earnings and losses from trading cryptocurrency by using any one of the following strategies:
Take the selling price and subtract it from the cost price
Find out how much money you’ve gained or lost trading cryptocurrencies with this straightforward and simple way. The only thing that remains for you to do is subtract the price at which you sold the cryptocurrency from the price at which you originally purchased it.
Let’s look at the example of the cryptocurrency Bitcoin (BTC). Let’s say the price of one Bitcoin is $10,000 at the time this article was written. When the price of Bitcoin reached $15,000, you decided to sell your $10,000 holding in the cryptocurrency.
In this situation, the cost price should be subtracted from the selling price. You will make a deduction of $10,000 from the selling price of $15,000. The remaining $5,000 of the money that you earn belongs to you.
A similar approach may be used to calculate the amount of your losses. Let’s imagine you paid $10,000 for your Bitcoin. Despite this, the price had dropped to $8,000, and you were concerned that it might go for much more than that. Because you received that in exchange for it, we will assume that this is what you created. A complete loss of two thousand dollars is one possible scenario.
Make Use of Profits That Were Not Completely Realized
Consequently, due to the unpredictability of the cryptocurrency market, some traders are tempted to cash in on their winnings and get out of the market. Traders may observe precisely how their trades are progressing in real time if they keep a careful eye on the market and monitor it closely. When a trader is preoccupied with short-term market changes, their ability to see the bigger picture may be impaired.
Keep an eye on the market if you bought Ethereum (ETH) at the price of $2,000 and continue to monitor the price. To phrase it another way, there has been a $200 increase in the price of Ethereum since it was last traded. The fact that you haven’t made a sale yet is the only thing that sets this model apart from the subtraction model.
After your transaction is finalized, the price of Ethereum (ETH) may see a temporary drop or perhaps fall completely. When the number of buy orders is more than the number of sell orders, which is a regular occurrence, this issue will most often arise. If the price of ETH falls to $1,800 after you have acquired it for $2,000, and your sell order has already been placed, then you have effectively lost $200. Because of this change, there will be an impact on both the profit and the loss.
Multiply Your Results to Get Your Profit Percentage
Percentage-based reporting is commonplace in the bitcoin trading industry. You’ll learn how to conduct the computation in the following stages. The percentage gain may be used to determine cryptocurrency trading profit.
This is how it’s done:
Just using percentage formulation, enhance the bitcoin price by that percentage. The following is the proper terminology to indicate profit margins ranging from 10% to 50%.
- for 10%
- for 20%
- for 30%
- for 40%
- for 50%
Let’s pretend you paid $2 for Cardano (ADA) when it first launched. You’re only interested in doing 10% of the transaction, and you want to get out of there as soon as possible. A 10% profit margin means you’ll need to double your original investment (the amount you paid for your ADA). The $2 registration fee is equivalent to $2.1 when multiplied by (x) 1.1. (10 percent).
As a result, you have a total of $2.2, which comprises your initial investment of $2 as well as your 10% profit. If your aim is to make 50% on the sale, you may apply a similar method. In this case, $2 multiplied by a factor of 1.5 is $3. Take $2 out of your checking account. One dollar is all that’s left for you to control. Multiplying $2 by two results in $4, or a profit of 100%. To get your answer, just multiply 100 times by “1.”
Utilize the Spreadsheet to your Advantage
By using a spreadsheet, you can easily keep tabs on all your successful and unsuccessful bitcoin trading transactions. The whole of this may be divided into subsections, such as the following:
- Which kind of money did you exchange and what was its name?
- What exactly are the units that are being traded?
- How much does the collection of coins cost in total?
- What was the total amount that you received for the coins?
- When did you decide to trade them for each other?
After the game is over, you should go back and look at the prices you paid to enter and leave. At the conclusion of the day, you will be able to determine whether you made money or lost money. If you do wind up losing money, it is smart to have some cash set aside for use in unexpected expenses.
Perform Some Analyses with the Help of Cryptocurrency Calculators Online
Do you find working with spreadsheets to be boring, or do you find the models using percentage profit or subtraction to be difficult?
Using one of the various online cryptocurrency calculators that are now accessible, you may determine your profit and loss from trading cryptocurrencies. When you use these calculators, it is simple to determine how much money you have gained or lost because of your participation in the cryptocurrency trading market.
The Bottom Line
If you can quantify your profit and loss when you buy crypto, you will be a more successful trader. Learning how to calculate your earnings and losses is one of the most crucial skills you can master if you want to be a successful trader. You should also try to rein in your desire for additional cash if you want to keep from blowing it all.