In cryptocurrency trading, PNL stands for Profit and Loss. It represents the amount of money a trader has gained or lost from their trades over a specific period or for a particular transaction.

Types of PNL

1. Realized PNL:

The actual profit or loss that occurs when a trade is closed (e.g., when you sell your crypto).

Formula:

\text{Realized PNL} = \text{Selling Price} - \text{Buying Price} - \text{Trading Fees}

2. Unrealized PNL (or floating PNL):

The profit or loss based on the current market value of your holdings while the position is still open.

Formula:

\text{Unrealized PNL} = (\text{Current Price} - \text{Entry Price}) \times \text{Quantity}

Example

If you bought 1 Bitcoin at $20,000 and its current price is $25,000:

Unrealized PNL = .

If you sell the Bitcoin at $25,000:

Realized PNL = $5,000 (minus any trading fees).

Importance of PNL

Tracking Performance: Helps traders evaluate their trading strategies.

Risk Management: Guides decisions on holding, selling, or cutting losses.

Many cryptocurrency trading platforms, such as Binance, Bybit, or Coinbase, provide real-time PNL calculations for convenience.