p/l meaning

What Does Profit and Loss (PnL) Mean?

Profit and loss (PnL) refers to the value difference between your buy and sell price (or current market price), minus any associated costs. If the result is positive, you have a profit; if negative, it’s a loss. PnL can be both real-time and “locked in” once you complete a trade.

For example: if you buy apples for 100 CNY and later sell them for 120 CNY, subtracting a 2 CNY delivery fee, your PnL is +18 CNY. If you only look at the current market quote before selling, you see the “unrealized PnL.” The same logic applies to investing and trading—just swap apples for coins, and add fees and time as factors.

How Is PnL Calculated?

The standard approach is to first calculate “total cost,” then “total revenue,” and finally take the difference.

Step 1: Identify total cost. Cost = purchase amount + buy-side fees + other expenses (such as blockchain network fees).

Step 2: Identify revenue. Revenue = sale amount − sell-side fees − other related expenses.

Step 3: Calculate PnL. PnL = revenue − cost; return rate = PnL ÷ cost. If not sold yet, unrealized PnL = current market value − cost.

Example: You buy 2 tokens at 1,500 USDT each, with a transaction fee rate of 0.1%. Buy cost = 2 × 1,500 + 3 = 3,003 USDT. If you sell at 1,600 USDT per token with a sell fee of about 3.2 USDT, revenue = 3,200 − 3.2 = 3,196.8 USDT. Therefore, PnL = 193.8 USDT, and the return rate is approximately 6.46%.

How Is PnL Reflected in Spot Trading?

In spot trading, profit or loss comes from buying low and selling high (or vice versa), with the key factors being price difference and fees. The coins you hold are valued at the latest traded price, resulting in “unrealized PnL.” Once you sell, it becomes “realized PnL.”

For example, on Gate spot trading, you can view executed order details including average execution price and transaction fees. The asset page displays unrealized PnL based on current prices. After selling, your account statement records realized PnL, making reconciliation easy.

A useful tip: calculating the breakeven sale price. Breakeven ≈ total cost ÷ quantity ÷ (1 − sell fee rate). Continuing the example above: breakeven ≈ 3,003 ÷ 2 ÷ 0.999 ≈ 1,503.00 USDT.

How Does PnL Differ in Contract Trading?

PnL in contract trading depends not only on entry and exit prices but also on leverage, margin, funding rates, and liquidation rules. Leverage means controlling a larger position with less capital—amplifying both potential profits and risks.

Example: Using a 500 USDT margin at 10x leverage gives a notional position of about 5,000 USDT. If the underlying asset rises by 5%, your notional PnL is roughly 5,000 × 5% = 250 USDT—representing +50% on your margin. A 5% drop would be −50%; if not managed carefully, this could trigger liquidation (forced closing of your position when margin is insufficient).

Additionally, perpetual contracts have funding rates (periodic payments exchanged between long and short positions), which can slightly affect your PnL while holding a position. For example, if the funding rate is 0.01% per 8 hours, holding for 24 hours costs or pays about 0.03% of the notional value—final amounts are settled by the platform. Gate contract’s “Position” page displays unrealized PnL, realized PnL, and funding fee records for easy review.

What’s the Difference Between PnL, Unrealized PnL, and Realized PnL?

Unrealized PnL is a “paper change”—calculated using current market prices but not actually realized; realized PnL is locked in after a trade closes and is used for performance statistics and tax reporting.

Example: You buy a token for 1,000 USDT. The current value is 800 USDT; unrealized PnL is −200 USDT. If you sell now and receive 790 USDT after fees, realized PnL is −210 USDT. The two figures may differ due to fees, slippage, or varying execution prices.

Why Are PnL Results Affected by Fees and Slippage?

Fees directly reduce your net income or increase your net cost. Slippage refers to the difference between expected and actual execution prices—common in volatile or illiquid markets.

For example: you want to sell 1,000 tokens at 10.00 USDT each, but only 200 are bid at that price—the remaining tokens fill at lower prices like 9.98 or 9.95 USDT. Your actual average price may be only 9.97 USDT—this 0.03 difference is due to slippage. On Gate, you can reduce slippage by using limit orders, splitting your order into smaller trades, or trading during periods of higher liquidity.

On-chain trades also include network fees (paid to blockchain validators), which should be counted as part of your cost base. When trading frequently with small amounts, these fees can significantly erode your overall returns.

How to Manage Risk for PnL in Web3 Investing?

Effective risk management means setting boundaries before trading, executing according to rules during trades, and reviewing outcomes afterward.

Step one: Determine single-trade risk. A common approach is to cap loss per trade at 1–2% of account equity. For example, with a 10,000 USDT account, limit loss per trade to 100–200 USDT; calculate position size and stop-loss accordingly.

Step two: Set stop-loss and take-profit orders. A stop-loss automatically closes your position when the price hits a preset level to limit losses; take-profit locks in profits when a target price is reached. Gate offers conditional orders with stop-loss/take-profit options to avoid emotional decisions.

Step three: Control slippage and fees. Prioritize limit orders and partial fills; reduce leverage or position size during high volatility; monitor network fees for on-chain transactions during peak times.

Step four: Record and review trades. Log each trade’s entry/exit points, rationale, PnL, fees, and execution details in a spreadsheet; review weekly to ensure adherence to your plan.

How Is PnL Handled for Tax Reporting and Bookkeeping?

In most jurisdictions (as of 2025; local regulations may vary), realized PnL usually impacts tax filings while unrealized PnL is mainly used for internal assessment. Common cost basis methods include FIFO (first-in-first-out), LIFO (last-in-first-out), or weighted average—be consistent throughout the year.

In practice: export CSVs of trading records from Gate including execution price, quantity, and fees; on-chain wallets can use block explorers to track transactions and include network fees as part of costs. For investors using multiple platforms or wallets, it’s recommended to maintain a unified ledger by account, asset class, and year. For tax details always follow local laws or consult a professional advisor.

How Can We Summarize the Meaning of PnL?

PnL is the core metric in investing and trading—driven by both price movements and associated costs. In spot markets, it depends on buy-sell price differences and fees; in contracts, leverage, funding rates, and liquidation mechanisms add further impact. Unrealized PnL helps with real-time evaluation; realized PnL defines final results. Only by factoring in all costs—including slippage—and implementing clear stop-loss/take-profit strategies with disciplined bookkeeping can you ensure your PnL figures are accurate and actionable for long-term trading success.

FAQ

How Do You Calculate Breakeven?

The breakeven point means your gains exactly offset your losses—the price level where you cover all costs. Calculation: buy price + (total fees ÷ position size) equals your breakeven price per unit. For example: buy 100 tokens at 100 CNY with total fees of 20 CNY; breakeven price is 100.2 CNY—once the price reaches this level you recover your cost.

What Is an Ideal Risk-Reward Ratio?

The risk-reward ratio compares expected profit to risk per trade—common recommendations are 1:2 or 1:3 (risk:reward). This means risking $1 to aim for $2–$3 profit per trade—so even with a win rate of just 50%, you can be profitable long term. Conservative traders may use a 1:3 ratio; aggressive traders might lower it but should avoid going below 1:1.

Why Does My Position’s PnL Keep Changing?

This is due to unrealized PnL fluctuating in real time as market prices change. As long as your position remains open, every price movement updates your account’s unrealized profit or loss—but these are only “on paper.” Only when you close out by selling does unrealized PnL become realized PnL—locking in your outcome.

Why Is PnL More Volatile in Contract Trading Than in Spot Markets?

Leverage in contract trading amplifies your position size—for example at 10x leverage a 10% move in price translates into a 100% swing in your PnL. Contracts also incur funding rates and transaction fees—making the PnL curve steeper overall. In spot trading with low leverage a 5% gain yields $5 profit; at 5x leverage on contracts that same move could net $50—or risk liquidation.

How Can I Prevent Fees and Slippage from Eating Into My Profits?

Fees are fixed costs that can be reduced through Gate’s VIP level discounts; slippage depends on market liquidity and order type. Recommendations: choose highly liquid trading pairs to minimize slippage; use limit orders instead of market orders for precise execution; split large orders to avoid market impact; execute large trades during low-fee periods (off-peak hours) whenever possible.