How trade profit and return are computed after fees
The profit on a trade is simpler than it sounds, but the fees are easy to forget. Your total cost is what you paid for the shares plus the commission charged on the purchase; your proceeds are what the shares sold for minus the commission charged on the sale. Profit is just proceeds less cost. By folding both commissions in, the calculation shows the amount that genuinely changes your balance rather than a headline gain that ignores the cost of doing business. On larger trades the fees barely register, but on small positions they can turn a modest winner into a break-even or a loss, which is exactly why they belong in the sum. To find your average entry price across several purchases before you sell, see thestock average calculator.
The profit formula
Total cost = buy price × shares + buy commission
Proceeds = sell price × shares − sell commission
Profit = Proceeds − Total cost
Return on cost = Profit ÷ Total cost
The return on cost expresses the profit as a percentage of what you put in, which is the figure that lets you compare trades of very different sizes on equal terms.
Worked example
Suppose you buy 100 shares at $50.00 and later sell them at $75.00, paying a $10.00 commission on each side of the trade:
| Step | Amount |
|---|---|
| Total cost100 shares × $50.00 plus the $10.00 buy commission | $5,010.00 |
| Proceeds100 shares × $75.00 minus the $10.00 sell commission | $7,490.00 |
| = Profitproceeds minus total cost — a 49.5% return on cost, before tax and not annualized | $2,480.00 |
Computed with this calculator's default settings — open the tool above and you'll see the same numbers, then plug in your own trade.
Dollar profit versus percentage return
It is tempting to judge a trade by the dollars it made, but the percentage return is the more useful measure. Two trades can both make $500 while one risked $1,000 and the other $50,000 — a 50 percent return against a 1 percent return. The percentage strips out the effect of position size so you can see which trade actually used your capital well. Keep two things in mind, though. First, this profit is pre-tax: capital gains tax is applied separately when you realise a gain, and the rate depends on your holding period and income, so your take-home is always less than the figure shown here. You can estimate that bill with thecapital gains calculator. Second, the return is not annualized. A 50 percent gain earned over five years is not 50 percent a year — it is closer to 8 percent annually once you spread it out. To compare a quick trade with a long-held one on the same footing, convert each to an annual rate with theROI calculator.
Frequently asked questions
How is profit on a stock trade calculated?
Profit is the proceeds from selling minus the total cost of buying. The total cost is the buy price times the number of shares plus the buy commission, while the proceeds are the sell price times the number of shares minus the sell commission. Subtracting cost from proceeds gives the dollar profit or loss that actually reaches your account once both fees are accounted for.
Why include commissions in the calculation?
Commissions are a real cost of trading, so leaving them out overstates your gain. The buy commission raises the price you effectively paid and the sell commission lowers the amount you actually receive. On small trades these fees can swallow a meaningful slice of the profit, which is why this calculator nets both of them out to show the honest result.
What is the difference between dollar profit and percentage return?
Dollar profit tells you how much money you made, while percentage return tells you how hard your money worked. A $500 profit looks the same in dollars whether you risked $1,000 or $50,000, but the return on cost is 50 percent in the first case and only 1 percent in the second. The percentage is the better figure for comparing one trade against another because it puts every result on the same footing.
Is this profit figure before or after tax?
The figure is pre-tax. It reflects your gain after trading commissions but before any capital gains tax, which is assessed separately when you sell at a profit. The rate you owe depends on your holding period and income, so your take-home amount will be lower than the profit shown here once tax is applied.
Does the return percentage account for how long I held the stock?
No. The return on cost is a simple total return and is not annualized. A 50 percent gain earned over five years is not the same as 50 percent per year — spread across that period it is closer to 8 percent annually. To compare trades held for different lengths of time you would need to convert each one to an annualized rate.
Disclaimer: This calculator is foreducation and illustration only. It reflects profit after trading commissions but before tax, and the figures it produces are not valuations or recommendations for any specific security. Nothing here is investment, tax, or trading advice.