What you will learn
- Long and short P&L
- Gross versus net P&L
- Weighted average entry
- Currency conversion
Long and short P&L
For a long position, gross P&L is exit minus entry, multiplied by quantity and instrument multiplier. For a short position, reverse the price difference. Record the direction explicitly rather than relying on a sign convention that may change between files.
Gross versus net P&L
Net P&L subtracts all applicable costs from gross P&L. Commissions, financing and conversion charges may be reported separately. Avoid subtracting a spread again when it is already reflected in actual entry and exit fills.
Weighted average entry
For entries at different prices, a quantity-weighted average is total price-times-quantity divided by total quantity. A simple average is correct only when quantities are equal. Partial exits require a consistent matching method and reconciliation with the provider statement.
Currency conversion
Convert a P&L amount into account currency using the appropriate rate and convention. Multiplying when the rate is quoted in the inverse direction produces a unit error. Preserve the rate, timestamp and any conversion fee so the result can be reconstructed.
Worked example
Buy one unit at 100 and three at 104: average entry is (100 + 312)/4 = 103. Exit all four at 105 with multiplier one: gross P&L is 8. If total separately charged costs are 3, net P&L is 5.
Try it yourself
For a short of two units entered at 108 and exited at 105 with multiplier ten, compute gross P&L and then subtract 7 of total costs.
Show the worked solution
A short gains from the decline: (108 − 105) × 2 × 10 = 60 gross. Net P&L is 53 after subtracting costs. Reversing the subtraction would incorrectly turn the winning short into a loss.
Apply this to your course project
Produce a checked workbook of ten sizing and P&L cases, including losing trades.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.