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Look at this trade:

Sequence Side Quantity   @ Price
1.       Buy    10       @ 1,0  (with leverage of 50)
2.       Sell   10       @ 1,2  (inherits the leverage of 50?)

Imagine that this trade is a CFD or a forex with USDEUR. I use a leverage of 50 for buy. How should I include this leverage within my PnL calculations?

Is this the right formula:

PnL  = quantity * (ExitPrice * exitLeverage - EntryPrice * entryLeverage)

Question:

Do I need to multiply the entry or exit prices by the leverage at all, or does the broker already returns the trades with the "leveraged prices"?

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Yes, that is right.

You could also do: Pnl = (Exit - Entry) * Leverage To save yourself multiplying by leverage twice.

There are also costs associated with putting trades on/off so these should be taken into consideration.

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  • $\begingroup$ The formula seems wrong. The leverage of exit and entry can be different, because when using (for example, FIFO), then I must sum up all trades from the entry side which can have different leverages and the trades from the exit side (which also can have different leverages). $\endgroup$ – nimo23 Apr 22 at 19:47

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