Profit and loss (P/L) calculation is fundamental to evaluating trade performance. The basic formula is: P/L = (Close Price - Open Price) × Direction × Lot Size × Contract Size.

For long (buy) positions, profit occurs when the close price is higher than the open price. For short (sell) positions, profit occurs when the close price is lower than the open price.

The direction multiplier is +1 for long positions and -1 for short positions. This ensures the P/L correctly reflects whether you profit from rising or falling prices.

Pips gained or lost are calculated as the absolute price difference divided by the pip size (typically 0.0001). Each pip translates to a specific dollar amount based on your lot size.

Always account for spreads and commissions when calculating real P/L. The spread is an immediate cost upon opening a position, reducing your effective entry price for longs and increasing it for shorts.