What is Profit and Loss (PnL) and How is It Calculated?

Profit and loss (PnL) refers to the actual gains or losses generated from trading activities. It is determined by the price difference between the opening and closing of a position. In futures trading, PnL is divided into two categories:

Unrealized PnL: The potential profit or loss of an open position, calculated using the current fair mark price. This value fluctuates in real-time as the mark price changes.

Realized PnL: The actual profit or loss incurred after closing a position, calculated based on the difference between the entry price and exit price.

PnL = position size × (exit price − entry price)

For example:
Let’s assume you open a long position with the BTC/USDT futures trading pair for 0.01 BTC at an entry price of 70,000 USDT and close the position at 80,000 USDT.
Ignoring transaction fees, the realized PnL is:

0.01 BTC × (80,000 USDT − 70,000 USDT) = 0.01 × 10,000 USDT = 100 USDT (Profit)