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4. PnL: What is PnL (Profit and Loss) and How to Calculate It?

# PnL: What is PnL (Profit and Loss) and How to Calculate It?

PnL stands for profit and loss, and it can be either realized or unrealized. It can be used to describe the change in the value of a trader’s positions. When you have open positions, your PnL is unrealized, meaning it’s still changing in response to market moves. When you close your positions, the unrealized PnL becomes realized PnL.

## Realized PnL & Unrealized PnL Explained

### What is a Realized PnL?

Realized PnL is calculated using based on your closing price and entry price. Because the realized PnL refers to the profit or loss that originate from closed positions, it has no direct relation to the mark price, but only to the executed price of the orders.

### What is an Unrealized PnL?

The unrealized PnL, on the other hand, is constantly changing and is the primary driver for liquidations. Thus, the mark price is used to ensure that the unrealized PnL calculation is accurate and just.PnL is always denoted in the settlement currency.

The process of calculating your realized PnL varies based on the type of contract you hold. Below are all of the relevant equations for each type of possible contract.

Follow here for a Full Breakdown of Realized PnL & Unrealized PnL

## PnL Calculations

### Inverse Contract Long

To help clarify the equations, we will use our BTCUSD Inverse Contract as the base for these examples. The PnL for this type of contract is calculated as such:

PnL = Open Value – Close Value = [(Contract Quantity x Contract Size)/Open Price] – [(Contract Quantity x Contract Size)/Close Price]

For example: If a trader buys 1000 BTCUSD contracts at \$6000 and sells these at \$7000, the profit will be:

[(1000 x 1)/6000] – [(1000 x 1)/7000] = 0.0238 BTC

### Inverse Contract Short

For a Short Position Inverse Contract, the PnL is calculated as such:

PnL = Close Value – Open Value = [(Contract Quantity x Contract Size)/Close Price] – [(Contract Quantity x Contract Size)/Open Price]

For example: If a trader sells 1000 BTCUSD contracts at \$6000 and then buys these at \$5000, the profit will be:

[(1000 x 1)/5000] – [(1000 x 1)/6000] = 0.0333 BTC

### Linear Contract Long

To clarify Linear Contract equations, we will use our ETHUSD and XRPUSD Linear Contracts as the basses for these examples. The PnL for a Long Position Linear Contract is calculated as such:

PnL = Close Value – Open Value = Contract Quantity x Contract Size x Close Price – Contract Quantity x Contract Size x Open Price

For example: If a trader buys 500 ETHUSD Contracts at \$120 and sells these at \$130, the profit will be:

PnL = 500 x 0.005 x 130 – 500 x 0.005 x 120 = 25 USD

### Linear Contract Short

For a Short Position Linear Contract, the PnL is calculated as such:

PnL = Open Value – Close Value = Contract Quantity x Contract Size x Open Price – Contract Quantity x Contract Size x Close Price

For example: If a trader sells 500 XRPUSD Contracts at \$0.15 and buys these at \$0.14. The profit will be:

PnL = 500 x 5 x 0.15 – 500 x 5 x 0.14 = 25 USD

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