A measure of how much money a trader or portfolio has gained or lost over a specific period.
PnL (Profit and Loss)
PnL (Profit and Loss) represents the financial outcome of trading activity—how much value has been gained or lost. It is one of the core metrics used by traders, market makers, and funds to evaluate performance, strategy efficiency, and risk exposure.
PnL can be calculated in absolute numbers or percentages based on positions, portfolios, or entire trading systems.
How PnL Works
PnL typically considers:
Entry price vs. exit price
Fees, funding rates, or commissions
Unrealized gains/losses on open positions
Realized gains/losses on closed trades
PnL can be realized (locked in) or unrealized (floating based on open trades).
Types of PnL
Realized PnL: From completed trades
Unrealized PnL: From positions still open
Mark-to-market PnL: Updated dynamically based on current price
Cumulative PnL: Total performance over time
PnL helps traders evaluate whether strategies are actually profitable beyond short-term variance.
Why PnL Matters
Shows trading performance objectively
Helps monitor risk and exposure
Used to adjust strategy decisions
Essential for market makers to track inventory value
Vital for fund reporting, accounting, and audits
Summary
PnL is the measure of trading gains or losses, helping traders track performance, manage risk, and assess the effectiveness of their strategies.
