What Is PnL: A Guide to Realized and Unrealized Profit and Loss

PnL stands for Profit and Loss and is a basic metric used to measure trading performance. Unrealized PnL reflects the floating profit or loss of an open position as market prices change, while realized PnL is associated with trades that have already been closed. Different platforms may use different rules for mark price, trading fees, funding fees, and contract size, so the PnL shown while a position is open may differ from the final result after closing. Understanding PnL is not only about knowing how much you made or lost, but also about reviewing trades and managing risk more effectively.

What Is PnL?

PnL stands for Profit and Loss.

• Unrealized PnL:
  The floating profit or loss on a position that is still open, calculated using the current reference price. Because the market price can continue to change, unrealized PnL is not the final trading result.

• Realized PnL:
  Profit or loss from a trade that has already been completed or closed. For example, after a long futures position is closed, the difference between the entry price and actual exit price contributes to realized trading PnL.

In practice, trading platforms may also include trading fees, funding fees, and other charges in realized results.

How Is PnL Calculated? Can Profit Change After Closing a Position?

For spot trading, a simplified formula can be written as:

PnL = Proceeds from Sale − Purchase Cost − Related Fees

For example, if you buy an asset for 1,000 USDT and later sell the entire position for 1,100 USDT, your PnL would be 100 USDT before fees.

For common USDT-margined linear futures, the basic logic is:

Long Unrealized PnL = Current Reference Price − Average Entry Price, multiplied by Position Size.

Short Unrealized PnL = Average Entry Price − Current Reference Price, multiplied by Position Size.

In practice, platforms may also multiply by contract size and use Mark Price, Fair Price, or another reference price. MEXC’s current USDT-margined futures formula, for example, uses Fair Price, average entry price, contract quantity, and Contract Size.

PnL can change after a position is closed for three main reasons: the actual execution price may differ from the reference price shown while the position was open; opening and closing fees need to be settled; and perpetual futures positions may also incur or receive funding fees.

For this reason, when reviewing PnL, always confirm which price is being used, whether the figure is realized or unrealized, and whether fees have already been included.

How Should You Understand PnL, ROI, and Leverage?

PnL and ROI are not the same metric.

PnL measures the actual amount of profit or loss, while ROI usually measures profit or loss relative to the initial margin. A common formula is:

ROI = PnL ÷ Initial Margin × 100%

One common misconception is that higher leverage automatically creates higher PnL.

If the notional position size and price movement remain exactly the same, increasing leverage does not automatically increase the price-based profit or loss of that position. Leverage mainly reduces the amount of initial margin required to open the same notional position. This can increase the displayed ROI while also reducing how much adverse price movement the account can absorb.

For this reason, a high ROI screenshot alone does not show whether a trading strategy was effective. A more complete trade review should also consider position size, leverage, trading fees, funding fees, maximum drawdown, and the amount of risk taken.

FAQ

• Does a positive PnL mean I have already made a profit?
  If it is unrealized PnL, it only means the open position is currently in profit. If the market moves, that figure may decrease or even turn negative.

• Why is my PnL lower after I close the position?
  The difference may come from the actual execution price, opening and closing fees, funding fees, or differences between the reference price and final fill price.

• Does higher leverage always mean higher actual profit?
  Not for the same notional position size. Leverage changes the margin requirement and risk exposure ratio, while also affecting ROI and liquidation risk.

• What is the difference between PnL and ROI?
  PnL shows the amount of profit or loss, while ROI shows that profit or loss as a percentage of margin or capital used.

• Why can PnL differ across exchanges?
  Different platforms may use different mark prices, contract sizes, fee structures, and display rules, so users should always refer to the relevant product documentation.

Mastering the basics is the first step. Follow MGBX Academy to access more cryptocurrency educational resources and market opportunities.

The process for trading on MGBX:

1. Register a trading account and complete the necessary identity verification;

2. Deposit funds and select a trade type;

3. On the cryptocurrency trading page, enter the amount or quantity of the cryptocurrency you wish to purchase;

4. Confirm the order to complete the trade, and check that your assets have increased accordingly.