Gross vs net profit
Gross profit is what you make from price movement before costs. Net profit subtracts trading fees: commission and spread (or fee %). What you actually keep is net. If you plan only on gross, you can overestimate returns, especially with many trades or tight targets where fees are a large share of profit.
Net R:R
Risk-reward is often quoted in gross terms. Net R (or net R:R) uses net profit as the reward. So if you risk $100 and your net profit is $120, net R = 1.2. A risk-reward calculator that supports fees lets you see both gross and net R so you can judge whether the trade is still attractive after costs.
Example
You risk $100. Gross profit at full target = $200 (2R). Fee 0.05% per side on a $5,000 position: entry fee $2.50, exit $2.50, total $5. Net profit = $195, net R ≈ 1.95. Still good. If gross profit were $30 (0.3R), the same $5 fee would make net $25 and net R 0.25, so the trade might not be worth it. Always check net when targets are small or fees are high.
FAQ
- What is gross profit in trading?
- Gross profit is the profit from price movement only: (exit price - entry price) × quantity for a long, before deducting any fees.
- What is net profit?
- Net profit is gross profit minus trading fees (entry and exit). It is what you actually keep after costs. Planning on net profit is more realistic.
- What is net R (risk)?
- Net R is the reward expressed in units of risk, after fees. If you risk $100 and net profit is $150, net R = 1.5. It is the R:R that accounts for fees.
- Why does net matter for small targets?
- When take-profit is close, fees can eat a large share of gross profit. Net profit and net R show whether the trade is still worth taking after costs.