How does profit or loss on exchange rate work?

When you hold securities or cash in a currency other than your base currency, your return comes from two sources. The price of the security moves, but so does the exchange rate between that currency and your base currency. If a US stock rises 10% while the dollar loses 5% against the euro, a lot less of that gain is left in euros.

That's why the performance of a security splits your result into two lines: profit or loss on price and profit or loss on exchange rate.

An example

You buy 1 Apple share for $ 312.41 when 1 EUR = 1.1525 USD. In euros, you invested € 271.07. Some time later, Apple trades at $ 336.67 and 1 EUR = 1.1197 USD. Your share is now worth € 300.68. Your total profit is € 29.61.

Profit on price

This is what the price increase of the share itself earned you. We convert it at your purchase exchange rate, so the exchange rate plays no part here.

Portfolio value                   $ 336.67
Total invested                  - $ 312.41
                                   $ 24.26
Avg. purchase exchange rate       ÷ 1.1525
Profit on price                    € 21.05

Profit on exchange rate

This is what the exchange rate earned you. We compare the value of your share at the current exchange rate with the same value at your purchase exchange rate.

At current exchange rate            300.68
(1 EUR = 1.1197 USD)
At avg. purchase exchange rate    - 292.12
(1 EUR = 1.1525 USD)
Profit on exchange rate             € 8.56

Together that's € 21.05 + € 8.56 = € 29.61, exactly your total profit.

The average purchase exchange rate

If you buy a security in several steps, you usually do so at different exchange rates. That's why we use an average purchase exchange rate, weighted by the amount of each purchase. The average changes with every new purchase.

Unrealised and realised

Just like with the price, we split the exchange rate result into two parts.

• Unrealised: the result on what you still hold. We calculate it with the current exchange rate and your average purchase exchange rate as it is today. This amount moves every day.
• Realised: the result you locked in with your sales. We calculate it with your average sale exchange rate and your average purchase exchange rate at the moment of each sale. Later purchases no longer change this result.

Exchange rate result on cash

Cash in a currency other than your base currency also moves with the exchange rate. That's why the performance of a cash position also shows profit or loss on exchange rate. Here too, we split it into unrealised and realised, each with its own average purchase exchange rate.

• Unrealised is the result on the balance you hold now. The average purchase exchange rate here is today's. Every amount that comes in, such as an FX conversion or a deposit, moves this average, weighted by the amount. Money that leaves doesn't change the average. We compare this average with the current exchange rate.
• Realised arises as soon as money leaves that currency, for example when you convert it back, withdraw it or buy a security with it. For every conversion, withdrawal or purchase, we record two exchange rates: your average purchase exchange rate at that moment and the exchange rate of the conversion itself. Across all those moments together, we calculate your average purchase exchange rate and your average conversion exchange rate, weighted by the amount. We compare those two.

An example

Unrealised

You still hold $ 800. The deposit in May moved your average purchase exchange rate to 1.1478. The conversions in March and July didn't.

At current exchange rate             € 707.96
(1 EUR = 1.1300 USD)
At avg. purchase exchange rate     - € 696.97
(1 EUR = 1.1478 USD)
Profit on exchange rate              € 10.99

Realised

You converted $ 900 back in total. For March, we use the average of March (1.1000), for July the average of July (1.1478). Together, that gives an average purchase exchange rate of 1.1208. In March you received € 476.19 and in July € 363.64, together € 839.83 for $ 900. That's an average conversion exchange rate of 1.0716.

At avg. conversion exchange rate     € 839.83
(1 EUR = 1.0716 USD)
At avg. purchase exchange rate     - € 803.03
(1 EUR = 1.1208 USD)
Profit on exchange rate              € 36.80

So the deposit in May doesn't change the result of March afterwards. That's why the average purchase exchange rate under realised (1.1208) differs from the one under unrealised (1.1478).