Profit and Loss
Also known as: PnL, P/L
The calculation of financial gain or loss from a trading position.
Plain-English Meaning
Profit and Loss, often called PnL, is simply the tracking of how much money a trade has made or lost. Unrealized PnL is the current standing of an open trade, while Realized PnL is the final result once the trade is closed.
Why It Matters
Accurately estimating potential PnL before entering a trade ensures that the targets align with the trader's overall goals and risk limits.
Simple Example
If you buy an asset at $100 and sell it at $120, your realized profit is $20 (excluding fees).
This educational example uses selected assumptions for reference calculation purposes. Real conditions may vary by broker, exchange, or instrument.
Beginner Mistake
Focusing entirely on the potential profit without equally evaluating the potential loss before opening a trade.