Why Doesn't Nexto's Profit Match Your Mental Math? — Profit per Trade, Step by Step

You buy 1,000 euros for 198 million toman (the Iranian currency) and a few hours later sell them for 199 million 800 thousand toman. Mental math says 1.8 million toman of profit; with the dollar at 180,000 toman, that is 10 dollars. Yet the software shows only 5 dollars of profit for the two trades combined.

The software's number is not wrong. This article walks step by step through exactly what Nexto calculates on every trade, and where those 5 dollars come from. You can also watch the video version of this tutorial:

Two numbers for every currency: balance and average

Nexto measures all profit in a single currency, called the reference currency; in this example, the US dollar. The important consequence is that the toman is an ordinary currency too, just like the euro and Tether, with its own balance and its own average.

Two numbers are kept for every currency:

The golden rule

Profit is only created when a currency's balance goes down. A purchase that increases the balance makes no profit; it only changes the average. The profit shows up on the day you sell that same currency:

Profit on sale = (sale rate − average) × amount

Every trade also has two sides: the currency you give and the currency you receive. Nexto calculates each side separately, using that currency's own balance and average, and the trade's profit is the sum of the two sides. (The weighted average logic is fully explained in weighted average currency cost.)

When one side of the trade is the dollar

You hold no euros and buy 1,000 euros for 1,060 dollars. Because one side is the dollar, the euro rate comes straight from the trade itself: 1.06 dollars per euro. The dollar side never makes a profit, because profit is measured in the dollar itself.

Then you buy another 1,000 euros at 1.08 dollars. The balance went up, so there is no profit; only the average is updated:

Short, closing a short, and mixed trades

Now the opposite case, this time with Tether (USDT):

• Short: You hold no USDT and sell 1,000 USDT for 1,010 dollars. The balance turns negative. This sale has no profit yet, because nobody knows at what rate you will buy back later; Nexto only keeps the average sale rate (1.01).
• Closing the short: Then you buy 1,000 USDT for 1,000 dollars. Now profit is created: (1.01 − 1.00) × 1,000 = 10 dollars. You sold high and bought back low; had it been the other way round, it would be a loss.
• Mixed: You hold 500 USDT at an average of 1 dollar and sell 800 USDT at 1.01. Nexto splits the trade in two: 500 USDT out of the balance with 5 dollars of profit, and 300 USDT as a new short at this trade's own rate.

In the trade list, these cases carry the "Short", "Cover" and "Mixed" badges.

When neither side is the dollar

In a euro-against-toman trade, Nexto has to bring both sides into dollars. It values the currency you give in dollars at the board rate, and derives the other side's rate from the ratio of the two amounts. From there on, each side is calculated as before, with its own balance and average; so in a single trade both sides can create a profit or a loss.

Back to the first question: where did the 10 dollars go?

Before the two trades, you hold 2,000 euros at an average of 1.07, plus 1 billion 760 million toman that you collected when the dollar was 176,000 toman. Today the board shows the dollar at 180,000 toman.

First trade — buying 1,000 euros for 198 million toman:

• The currency you give is toman: 198,000,000 ÷ 180,000 = 1,100 dollars; so each euro cost 1.10 dollars.
• Euro side: the balance went up, so only the average changes: 3,000 euros at an average of 1.08. Zero profit.
• Toman side: the balance went down, so the result is created right here. These tomans had cost you 1,125 dollars and were worth 1,100 dollars today: a 25-dollar loss. It is the loss on selling toman that lost value in the meantime, not a loss on buying euros.

Second trade — selling 1,000 euros for 199.8 million toman:

• The currency you give is the euro; the board's sell rate is 1.11 dollars.
• Euro side: Nexto does not compare this sale with the morning's purchase; it compares it with the average of all your euros (1.08): (1.11 − 1.08) × 1,000 = 30 dollars of profit.
• Toman side: the balance went up; only the toman average is updated.

Total: −25 + 30 = 5 dollars, built from three pieces:

No profit has gone missing and none has been counted twice. If the earlier euros had also cost 1.10 and the toman had also been collected with the dollar at 180,000 toman, Nexto would have shown exactly those 10 dollars. In other words, the software has also accounted for the profit and loss on the balances you already held. (Why holding a currency balance creates hidden profit and loss: currency position and revaluation.)

Where to see this calculation

• The "Trade Summary" card on every trade document: the amounts to pay and to receive (if you charged a fee, it is already inside these amounts, so the fee is part of this profit too), each side's rate in dollars, the balance and average the calculation used, and the trade's profit.
• The trade form preview: the same summary before saving; the dealer knows in advance whether the trade sells from the balance, opens a short or only changes the average.
• The Currency Position Report: the balance and average of every currency, the "Unrealized Profit" column at the board's mid rate, and the "If I trade now…" tool, which shows the profit of a hypothetical trade before you make it.
• Day Summary: today's story of each currency in one row: the balance and average it started with, what was bought and sold, and its realized profit. In the example above, the 30 dollars sit in the euro row and the 25-dollar loss in the toman row.

These figures are visible only to users who have permission to see profit. The total profit for a period is in the Profit & Loss report.

Why the board must always be up to date

In a trade where neither side is the dollar, the board rate goes straight into the profit calculation. If the board has not been updated and still shows the dollar at 176,000 toman, the same 198 million toman are counted as 1,125 dollars: today's 25-dollar toman loss goes unseen, and the euros enter the balance at more than their real cost. That loss does not disappear; it is spread later across the euro sales. In other words, the profit is booked in the wrong currency on the wrong day. The best approach is to update the board automatically. (On the board and the spread: buy and sell rates and the spread.)

Summary: four rules

Whenever the software's profit does not match your mental math, go over these four rules first. For the bigger picture of where an exchange's profit comes from: how exchange profit is calculated.