Crypto is the new buzzword in monetary realms. The geeks always strive to edge out their opponents and milk the most of greenbacks in a single fell swoop. However, crypto trading is not as simple as it seems. It is the extreme prestidigitation of numbers. Hence, the doer must know the nitty-gritty to tread this untrodden path cautiously.
The prime aim of crypto trading is to make profits and this aim should not be sacrificed at any cost. This blog is dedicated to making you aware of crypto trading and ultimately making you a crypto master.
Moreover, the calculations also help balance the portfolio. The million-dollar question is how to execute this win-win balance sheet without any external help. To figure out this tech-mystery of the 21st century, stay with us!
Two Pints of Advice
Before reading the main content, it is pertinent to mention that every year hundreds of crypto traders lose their hard-earned wherewithal and go broke. Most of the time, the reason for this sudden turn of fortunes is not acting on time. Time is a cruel entity, it crushes all those who leave behind, especially in the crypto domain.
A good rule of thumb is never to sell during losing streaks. This piece of advice should be borne in mind before sketching or executing any profit and loss strategy. You can only apply this plan if you know how to calculate crypto trading profit and loss.
As there is a myriad of strategies to calculate; we will individually describe all to provide you ample room to pick what suits and works in your case.
This is the simplest method to calculate the profit and loss streaks in the crypto domain. All you have to do is to subtract the value you sold the cryptocurrency for from the value you purchased it for.
A simple example of Bitcoin (BTC) will clarify this strategy, Suppose you bought a Bitcoin during trading for $15,000 and then sold it, taking leverage of a spike, at $20,000.
In this scenario, you need to remove the original price (the price you purchased it at) from the selling one. That is, you have to remove $15,000 from $20,000. The remaining $5,000 is the profit.
On the flip side, the same model can be used to calculate the loss. You bought Bitcoin for $15,000 and it tanked to $10,000. You are afraid that the price will further plunge so you are ready to sell despite our warning. This means you get a loss of $5,000 in your account.
Many times, cryptocurrency traders cross the red line and try to make a hell of profits in a volatile market. Hence, it is important to keep a sharp eye on the market’s volatility. The ebbs and crests portend whether you are making profits or inflicting losses. Nevertheless, obsession can cocoon the trader to oversee the whole clear picture.
For example, you bought Ethereum (ETH) for $5,000. Keep an eye on the market. If the existing value of Ethereum (ETH) bumps up to $7,000, it directly translates to having earned $2,000.
The only difference between this strategy and the first subtraction is that you have not gotten tangible profits by selling.
On the flip side, the price of Ethereum (ETH) can fall or even tank before you get the tangible proceedings. This only happens when buying steak is stronger than selling it.
Suppose, you bought Ethereum (ETH) for $5,000 and it falls to $3,000 after you place your selling order. This means you indirectly lose $2,000. These post-sale profit and loss calculations are a bit murky and make the trader perplexed.
A wise trader always relies on percentage-based profits. Below is the complete method of calculating that profit. You just need to multiply for the percentage increase.
For example, multiply the buying price of cryptocurrency according to the corresponding percentage expressions. The percentage expressions can be expressed in this format:
10% as 1.1
20% as 1.2
30% as 1.3
40% as 1.4
50% as 1.5
Now assume that you have purchased Cardano (ADA) at the base price of $2. Now, you want to just make a profit of 10% and leave the market on a high note. To get this 10% margin you need to multiply the basic price (the entry price) by the corresponding profit for 10%. That is, $2% (purchasing price) multiplied by (y) 1.1 (10%).
The calculation at hand is $2.2, where $2 is the capital and $0.2 is the real profit you have made.
To boot, another example to quote is to make clear understanding. If you want to earn a profit of 50%. The profit calculation would be $2 multiplied by 1.5 = $3. Now, remove your original capital of $2. The remainder is 50% of the capital that is the lush green note of $1.
You can also calculate the 100% profit by multiplying $2 × 2 = $4.
A simple rule of thumb is to add in the number “1” every time you need to multiply by a hundred.
The profits and losses of the spreadsheet should be mentioned by using a spreadsheet. You can organize the data points into different sections such as;
- Grand of the coins.
- Trading units.
- Purchasing amount.
- Selling amount.
- Dates of trading.
The spreadsheet provides you with a clear idea of buying and selling streaks. You get clear whether you won this crypto battle or lost it. The spreadsheet also provides you with a backup for future trading.
If the spreadsheet is banal for you and does not hit the right cockle of the heart. Try cryptocurrency calculators!
There are many online calculators available for free that provide you with a clear idea about your investment outcomes. The calculators serve you at best without fault. You just need to “Google” it and pick the best URL according to the predefined ratings.
A good understanding of Profit and Loss about Crypto makes you a sophisticated trader. A trader is laden with the flare of calculating revenue in a jiffy. This way, you can earn real profits and milk this potential industry in a better way. Moreover, you also contain the greed that plunges you down the abyss of liquidity. Stay safe!