Let's say I have a currency trading app. I start with $100 USD, and after 4 weeks, though trades, I now have $200 USD. My P&L would be 100$ or up $100.

So the calc would be: P&L = start_value - current_value

Now, in a similar scenario, I start the month with $100 USD, 2 weeks later I add $50 USD, 2 weeks later I now have $200 USD. How do I calculate the P&L for the last four weeks, considering I added $50 in the middle?

  • 2
    Why wouldn't it be "P&L = start_value - current_value - contributions"? – RonJohn Nov 2 '17 at 15:50

You could say

P/L_1 = V - $100
P/L_2 = $200 - (v + $50) = $150 - V

So that gives us the profit or loss for the first two weeks and then the second two weeks (V is the value at two weeks, when you add the $50). But if we add those, the V cancels out and we get:

P/L = P/L_1 + P/L_2 = $150 - $100 = $50

So in general, we could say

P/L = final value - (sum of contributions)

If we wanted to make things complicated, we could try to include inflation. The $50 two weeks from now is worth less than half the $100 now. Or the $200 at the end is worth less than twice the $100 now. But it can be difficult to calculate inflation for periods less than a month, as they don't usually report it more often than that. It's more something that you would do when calculating an annual number or a number for multiple years.

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