Stock Profit Examples
Example 1 - Winning Trade: Buy 100 shares at $50 ($5,000 + $5 commission). Sell at $60 ($6,000 - $5 commission). Gross profit: $1,000. Net profit: $990. Return: 19.8%. Breakeven: $50.10. This shows how a 20% price gain translates to slightly lower percentage return after commissions.
Example 2 - Day Trade: Buy 500 shares at $20 ($10,000 + $5). Sell same day at $20.50 ($10,250 - $5). Gross profit: $250. Net profit: $240. Return: 2.4%. Commissions represent only 4% of profit on larger trades, showing why position size matters.
Example 3 - Losing Trade: Buy 200 shares at $80 ($16,000 + $5). Sell at $75 ($15,000 - $5). Gross loss: $1,000. Net loss: $1,010. Return: -6.3%. Understanding exact losses helps with tax-loss harvesting and evaluating whether to hold or sell.
Frequently Asked Questions
How do I calculate stock profit?
Basic Formula: Net Profit = (Sell Price Ă— Shares) - (Buy Price Ă— Shares) - Buy Commission - Sell Commission. Return % = (Net Profit / (Buy Price Ă— Shares)) Ă— 100. Example: Buy 100 shares at $50 = $5,000. Sell at $60 = $6,000. Commissions: $5 each way. Net Profit = $6,000 - $5,000 - $5 - $5 = $990. Return % = ($990 / $5,000) Ă— 100 = 19.8%. Breakeven: (Buy Price Ă— Shares + Total Commissions) / Shares = ($5,000 + $10) / 100 = $50.10.
What is breakeven price?
Breakeven price is the stock price at which you neither make nor lose money on a trade, covering all costs including commissions. Formula: Breakeven = (Buy Price Ă— Shares + Buy Commission + Sell Commission) / Shares. Example: Buy 100 shares at $50 with $5 commission each way. Breakeven = ($5,000 + $5 + $5) / 100 = $50.10. Interpretation: You must sell at $50.10 or higher to profit. Selling at exactly $50.10 = break even. Selling below $50.10 = loss. This helps set minimum profit targets and stop-loss levels.
How do commissions affect my returns?
Commission Impact on Returns: Small Trades: $10 commission on $500 trade = 2% drag. $10 on $5,000 trade = 0.2% drag. Round-Trip Cost: Both buy and sell commissions reduce profit. Zero-Commission Brokers: Many brokers now offer free stock trades. Options Still Have Fees: Contract fees and exercise fees apply. Hidden Costs: Spread between bid and ask, market impact on large orders. Break-Even Analysis: Must overcome commission costs before profitable. Tax Implications: Commissions add to cost basis and reduce proceeds. Best Practice: Factor commissions into all profit calculations and target returns.
Should I include taxes in profit calculations?
For Pre-Trade Planning: Focus on gross/net profit before taxes. Tax rates vary by holding period and income. For After-Tax Reality: Short-term gains (held <1 year): Taxed as ordinary income (10-37%). Long-term gains (held >1 year): Taxed at 0%, 15%, or 20% based on income. State taxes may also apply. Net After-Tax Return: Multiply profit by (1 - tax rate). Example: $1,000 profit, 24% tax bracket short-term. After-tax: $1,000 × (1 - 0.24) = $760. Tax-Loss Harvesting: Offset gains with losses to reduce tax burden. Planning: Consider holding period in profit targets—long-term holds have tax advantages.
What is the difference between gross and net profit?
Gross Profit: (Sell Price - Buy Price) × Shares. Doesn't account for costs. Shows price appreciation only. Example: Buy at $50, sell at $60, 100 shares. Gross = ($60 - $50) × 100 = $1,000. Net Profit: Gross Profit - All Costs (commissions, fees, taxes). Shows true economic gain. Same example with $10 total commissions: Net = $1,000 - $10 = $990. Key Difference: Gross profit looks good on paper but doesn't reflect reality. Net profit is what actually enters your account. Always calculate both—gross shows trading skill, net shows actual returns.
How do I calculate percentage return on a stock trade?
Simple Return Formula: Return % = ((Sell Price - Buy Price) / Buy Price) Ă— 100. Total Return Including Costs: Return % = (Net Profit / Total Investment) Ă— 100. Example: Buy 100 shares at $50 ($5,000). Sell at $60 ($6,000). Commissions: $10 total. Simple Return: (($60 - $50) / $50) Ă— 100 = 20%. Total Return: (($6,000 - $5,000 - $10) / $5,000) Ă— 100 = 19.8%. Annualized Return: If held for less than a year, annualize to compare: (1 + Total Return)^(365/Days Held) - 1. Multiple Trades: Track cumulative returns, not per-trade averages.
What is a good return on a stock trade?
"Good" depends on strategy and timeframe: Day Trading: 1-3% per trade is typical target. Needs high win rate. Swing Trading: 5-10% over days/weeks. Position Trading: 15-25% over months. Long-Term Investing: 10-15% annualized (S&P 500 average). Risk-Adjusted: Higher returns should justify higher risk taken. Benchmark: Did you beat buy-and-hold of index fund? Win Rate Matters: 50% win rate with 2:1 profit/loss ratio can be profitable. Consistency: Steady 8% beats sporadic 50% returns with big losses. Personal Goals: Match returns to your financial objectives and risk tolerance.
How do I track profits across multiple trades?
Tracking Methods: Spreadsheet: Log each trade with date, symbol, shares, prices, P&L. Portfolio Software: Quicken, Personal Capital, brokerage tools. Brokerage Reports: Most provide realized gains/losses reports. Key Metrics to Track: Win Rate: % of profitable trades. Average Winner: Average profit on winning trades. Average Loser: Average loss on losing trades. Profit Factor: Gross profits / Gross losses. Maximum Drawdown: Largest peak-to-trough decline. Sharpe Ratio: Risk-adjusted returns. Review Frequency: Daily: Active day traders. Weekly: Swing traders. Monthly: Long-term investors. Analyze patterns to improve strategy.
When should I take profits on a stock?
Profit-Taking Strategies: Price Targets: Set targets based on technical analysis or valuation. Percentage Gains: Take partial profits at 20%, 50%, 100% gains. Time-Based: Sell after holding period (e.g., 1 year for long-term gains). Trailing Stops: Let winners run with stop-loss that follows price up. Fundamental Change: Sell if thesis no longer valid. Portfolio Rebalancing: Trim oversized positions. Considerations: Taxes: Long-term gains have favorable rates. Opportunity Cost: Could money work harder elsewhere? Original Thesis: Did you achieve your goal? Emotional Discipline: Don't let greed turn winners into losers.
How do I calculate profit on partial sells?
Partial Sale Calculation: Method: Use specific lot identification or average cost basis. Specific Lot: Choose which shares to sell. Minimize taxes or maximize losses. Average Cost: Total cost / Total shares = Cost per share. Apply to shares sold. Example: Buy 100 shares at $50 ($5,000). Buy 100 at $60 ($6,000). Average cost: $55/share. Sell 100 shares at $70. Profit: ($70 - $55) Ă— 100 = $1,500. Remaining position: 100 shares at $55 cost basis. Tax Implications: FIFO (First In, First Out) is default if no method specified. Specific lot identification requires informing broker before settlement.