The Most Important Rule: Deposits ≠ Profit
This is the most critical concept in the Private Accounts module. Understanding it ensures accurate tracking of your trading performance.
The Rule
Deposits and withdrawals do not represent profit or loss by themselves.
When you take money out of your trading account, that withdrawal is not automatically profit. When you put money in, that deposit is not automatically replacing losses.
Why This Matters
Many traders make this mental mistake:
"I withdrew $5,000 this month, so I made $5,000 profit!"
This might be true. But it might not be. Consider:
What if your account balance went down by $3,000?
What if you deposited $10,000 and only withdrew $5,000?
What if you were just moving money between accounts?
A withdrawal tells you money moved out. It doesn't tell you if you earned that money through trading.
The Correct Formula
To calculate true trading profit or loss:
Net Trading P&L = (Ending Balance − Starting Balance) − Deposits + Withdrawals
Let's break this down:
Ending Balance − Starting Balance = Raw change in account value
− Deposits = Subtract money you put in (it wasn't from trading)
+ Withdrawals = Add back money you took out (it was in the account before)
This isolates the change in value that came purely from trading.
Examples
Example 1: Simple Profit
Starting balance: $10,000
No deposits or withdrawals
Ending balance: $12,000
P&L: $12,000 − $10,000 − $0 + $0 = $2,000 profit
Simple case—balance increased from trading.
Example 2: Profit with Withdrawal
Starting balance: $10,000
No deposits
Withdrawal: $3,000
Ending balance: $9,000
P&L: $9,000 − $10,000 − $0 + $3,000 = $2,000 profit
You made $2,000. You withdrew $3,000, so your balance shows $1,000 less than the start, but your trading actually added $2,000.
Example 3: Deposit Masks Loss
Starting balance: $10,000
Deposit: $5,000
No withdrawals
Ending balance: $13,000
P&L: $13,000 − $10,000 − $5,000 + $0 = $2,000 loss
Your balance went up, but you deposited $5K. If you'd made money, the balance should be above $15K. You actually lost $2,000.
Example 4: Mixed Activity
Starting balance: $10,000
Deposit: $2,000
Withdrawal: $4,000
Ending balance: $10,000
P&L: $10,000 − $10,000 − $2,000 + $4,000 = $2,000 profit
Balance is unchanged, but you deposited $2K and withdrew $4K. You made $2,000 through trading.
Common Misconceptions
"I withdrew money, so I must be profitable"
Not necessarily. You might be:
Taking out losses before they get worse
Accessing capital for another purpose
Moving funds to a different account
Withdrawing some profit mixed with some capital
"My balance went up, so I'm doing well"
Not if you deposited money. The balance increase might just reflect what you put in.
"My balance went down, so I'm losing"
Not if you withdrew money. The balance decrease might just reflect what you took out.
Why the Platform Enforces This
The platform is designed to show you the truth about your trading performance. It:
Never labels a withdrawal as "profit withdrawn"
Never assumes a deposit replaces losses
Always calculates P&L using the correct formula
Keeps deposits and withdrawals as neutral capital movements
This prevents you from deceiving yourself about how well (or poorly) your trading is going.
Correct Language Examples
The platform uses language like:
How to Think About It
Deposits = Adding capital to the account (neutral movement) Withdrawals = Removing capital from the account (neutral movement) Net Trading P&L = The only measure of trading success
When you see your Net Trading P&L:
Positive = Your trading made money
Negative = Your trading lost money
Zero = Your trading broke even
Everything else is just money movement.
Summary
Withdrawals are not automatically profit
Deposits are not automatically replacing losses
Only Net Trading P&L shows true performance
The formula accounts for all capital movements
Trust the P&L number, not your intuition about deposits/withdrawals
Understanding this principle is essential for accurate self-assessment as a trader.
Next: Adding a New Private Account →