4.17How to calculate profit and loss
1What is it?
Profit or loss = (Selling price − Buying price) × Quantity, minus charges.
2Why does it exist?
Knowing your real (after-charges) profit stops you fooling yourself.
3Diagram
Invested (20 × ₹500)
₹10,000
Value at ₹600
₹12,000
Value at ₹400
₹8,000
4Calculation
P&L = (Sell − Buy) × Qty − Charges; Return % = P&L ÷ (Buy × Qty) × 100
- Budget: ₹10,000. Price: ₹500.
- Shares you can buy = ₹10,000 ÷ ₹500 = 20 shares (₹10,000 spent, ignoring charges).
- If price rises to ₹600: value = 20 × ₹600 = ₹12,000 → profit ₹2,000 (+20%).
- If price falls to ₹400: value = 20 × ₹400 = ₹8,000 → loss ₹2,000 (−20%).
- Charges (brokerage, STT, stamp duty, etc.) reduce profit or increase loss slightly. On a ₹10,000 delivery trade, expect very roughly ₹25–50 round trip depending on your broker. Always check the contract note.
Before charges: +₹2,000 at ₹600, −₹2,000 at ₹400. (Hypothetical example.)
5Practical use
Remember the asymmetry: after a 20% loss (₹10,000 → ₹8,000), you need a 25% gain to get back to ₹10,000. Losses hurt more than equal gains help.
6Quick revision
- P&L = (sell − buy) × qty − charges.
- Return % = P&L ÷ investment.
- Recovering from losses needs bigger % gains.
7Knowledge check
Q1. Buy 15 shares at ₹200, sell at ₹230. Profit before charges?Show answer
(230 − 200) × 15 = ₹450.
Q2. After a 50% loss, what gain do you need to recover?Show answer
100%.
Q3. With ₹10,000 and a ₹600 share, how many shares?Show answer
16 shares (₹9,600); ₹400 left.
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