Understanding profit calculation in contract trading is essential for traders to evaluate performance accurately. Below we break down the formulas and scenarios with practical examples.
Profit Calculation Formulas
Long Position Profit
Formula: Profit = Contract Face Value × Number of Contracts / Entry Price − Contract Face Value × Number of Contracts / Exit Price
Short Position Profit
Formula: Profit = Contract Face Value × Number of Contracts / Exit Price − Contract Face Value × Number of Contracts / Entry Price
Key Takeaway:
- Settled Trades: Profit = Pre-settlement Profit + Post-settlement Profit.
- Unsettled Trades: Apply the formula directly.
Case Studies
Case 1: Unsettled Position
Details:
- Entry Price: 0.233
- Exit Price: 0.2361
- Contracts: 1
Calculation: (10/0.233 − 10/0.2361) × 1 = 0.5635 XRP
Outcome: The trader gains 0.5635 XRP.
Case 2: Settled Position
Details:
- Settlement Reference Price (9/26): 0.2447
- Entry Price: 0.237
- Exit Price: 0.2435
- Contracts: 1
Bill Display: (10/0.2447 − 10/0.2435) × 1 = −0.2208
Actual Profit: (10/0.237 − 10/0.2435) × 1 = 1.126331
Note: The bill shows a loss due to settlement pricing, but the real profit is 1.126331.
Case 3: Settled Position with Additional Contracts
Details:
First Trade:
- Entry Price: 0.28
- Leverage: 10x
- Contracts: 1
- Settlement Price: 0.276
Second Trade:
- Entry Price: 0.2741
- Contracts: 1
Combined Settlement Price: 0.275
Bill Display: (10/0.275 − 10/0.2567) × 2 = −5.18468675
Actual Profit: (10/0.277 − 10/0.2567) × 2 = −5.70979342
Outcome: The bill overstates the loss due to settlement adjustments.
FAQs
1. Why does my bill show a different profit than my actual trade?
Profits displayed on bills use the settlement reference price for calculations, which may differ from your entry price. Always cross-check with your trade details.
2. How does settlement affect profit?
Settlement resets the cost basis to the settlement price. Subsequent profits/losses are calculated from this new benchmark.
3. Can I avoid settlement discrepancies?
No—settlement is mandatory. Track your original entry price separately for accurate self-assessment.
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4. What if I add more contracts after settlement?
The system merges positions and recalculates the settlement price. Your bill will reflect the weighted average of all contracts.
5. How is leverage factored into profit?
Leverage amplifies gains/losses but doesn’t directly appear in profit formulas. It affects margin requirements, not the P&L calculation.
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Key Considerations
- Keyword Integration: contract trading, profit calculation, settlement price, leverage, margin, XRP.
- Avoid: Redundant hyperlinks, outdated year references (e.g., "2023"), promotional content.
- Markdown Best Practices: Use tables for data comparison, headings for hierarchy, and bold text for emphasis.
Final Tip: Always reconcile bill figures with your trade history to ensure accuracy. Happy trading!