# "How the heck do I calculate profit and loss?"

I have two questions in the lesson “How the heck do I calculate profit and loss?” (Pre-school).

1. It said that “when you buy a currency, you pay the spread as you enter the trade but not as you exit. And when you sell a currency you don’t pay the spread when you enter but only when you exit.”

So, I understand that when I buy a currency, I just have to pay the spread as I enter the trade, but I don’t have to pay when I exit. And when I sell a currency, I don’t have to pay the spread when I enter, but I have to pay when I exit. Am I right?

1. Can you give an example to show me when selling a currency why I have to pay when I exit?

Thank you very much.

I have been demo and live trading for almost 2 yr’s. You only pay the spread when you enter a trade, never when you exit a trade, whether it’s a buy or sell. I may be wrong, hope i’m not, otherwise my broker has been taking me for a ride. Are you currently trading a live or demo account? Hope this helps, will try to read more on this topic.

Happy Pippin

Actually, you never really “pay” the spread. Think of it more like an automatic loss from your position, and it doesn’t matter whether you buy or sell.

Here’s what happens. Assume USD/JPY is trading at 120.10-15 when you make a new trade.

If you are buying you get in at 120.15, the offer price. If you were to immediately get out, you would sell at 120.10, so to start your trade you immediately are 5 pips in the hole. Obviously, you then expect the market to move at least 6 pips higher to get the bid price high enough for you to make a profit on the position.

Similarly, when you are selling you get in to the short at 120.10, meaning you’re at a 5 pip loss right away because you would have to buy back at 120.15 if you were to do so immediately.