What is the correct way to calculate profit?

You have described the 'First In First Out' and 'Weighted Average' method of costing your purchases. Both methods can correct, depending on what you are trying to achieve. If you have no specific intent in mind, this is slightly subjective.

For tax purposes, some countries allow or require you to use FIFO, and some allow or require you to use a weighted average method.

For a retail investor with no specific reason to choose FIFO, I suggest that the weighted average method is the most intuitive. If you have 10 shares of APPL and buy 10 more, the first 10 are comingled with the next 10 - they are 'fungible'. It is pointless to track those first 10 instead of just updating your weighted average cost as you go along, unless you have a specific need (ie: tax requirement or similar).