Profit in trading is a positive outcome of a financial market transaction when the asset moves in your favor. Simply put, profit is when the price at which you close the trade is higher when you bought the asset or lower when you sold it. The formula of profit is the following:

Profit = Result of the trade – Investment amount

Profit is the main goal of every trader. To gain money, market participants use various strategies that help them predict price fluctuations, calculate volatility, find key levels, and define market trends. Profit also reflects how successful a trader is over time.

Example of Profit in Trading

To make it clear about profit, let’s see the following example. A trader decides to buy a Higher contract for EUR/USD at 1.1300 as the strike price, as they assume the price will move above this level within the upcoming 2 minutes. They decide to invest $10 in the digital option contract with 90% profitability (payout). EUR/USD reaches 1.1301 at the expiration, which means that the trade is profitable. Therefore, the profit will be calculated in the following way: $10*90%-10 = $9.

When it comes to CFD trading, the next example will help you understand how this works for profit. A trader decides to sell 1 lot of gold at $3,000. The price hits $2,980, and the market participant decides to close the trade. Their profit will be $20*100 (1 lot = 100 ounces) = $2,000.

Profit and Risk

While profit is the main goal in trading, you should never forget about risks. Every trader has the potential of losing money instead of making gains due to the fact that the price may go in an unfavorable direction. Therefore, applying strict money and risk management is crucial for traders to grow their profits over time.