P and L

What Is Profit and Loss (PNL)?

Profit and Loss (PNL) represents the difference between the current value of your assets and their purchase cost, reflecting how much you have actually earned or lost. PNL accounts for all transaction-related fees and is categorized into realized and unrealized PNL based on the status of your positions.

The “cost basis” refers to the total expense incurred when purchasing an asset, including the transaction price multiplied by the quantity plus any fees paid at purchase. The current value is typically measured by multiplying your holdings by the latest market price or the “mark price,” which is a reference price used for risk management.

In the crypto market, PNL is a core metric for account performance. It is displayed in spot trading, derivatives, and strategy accounts, allowing you to assess risk and return in real time.

How Is PNL Calculated?

The core formula for PNL is “Current Value − Cost Basis.” The cost basis includes both the purchase price and any transaction fees, while current value is calculated using either the latest market price or the mark price multiplied by your position size.

Spot Example: If you buy 1 ETH at $3,000 with a $3 trading fee and the current price rises to $3,200, your unrealized PNL ≈ (3,200 × 1) − (3,000 × 1 + 3) = $197. Once you sell, realized PNL is further reduced by any selling fees.

Derivatives Example: If you go long 0.1 BTC in a perpetual contract at an entry price of $30,000, and the latest price is $30,500, your unrealized PNL ≈ (30,500 − 30,000) × 0.1 = $50. Any funding fees or opening fees must be added or subtracted to calculate net PNL.

“Mark-to-market” means unrealized PNL updates instantly with price changes. Many platforms use the mark price instead of the latest traded price to calculate unrealized PNL, reducing errors from short-term volatility.

What Is the Difference Between Realized and Unrealized PNL?

Realized PNL is the outcome locked in after a trade is closed—funds are settled into your account balance. Unrealized PNL reflects fluctuations in the value of your open positions based on current prices; it is unsettled and changes with the market.

For example: You buy 0.1 BTC at $30,000 with a $2 fee. The price rises to $32,000 but you haven’t sold yet; unrealized PNL ≈ (32,000 − 30,000) × 0.1 − 2 = ~$198. If you sell at $32,000 and pay a $2 selling fee, realized PNL ≈ (32,000 − 30,000) × 0.1 − (2 + 2) = $196.

In derivatives trading, realized PNL is generated after partially or fully closing a position; unrealized PNL continues to fluctuate with the mark price and can affect your margin level and liquidation risk.

How Does PNL Differ in Spot vs. Derivatives Trading?

In spot trading, PNL mainly depends on price changes and transaction fees, making it relatively straightforward. In derivatives trading, PNL can also be affected by funding fees, slippage, and leverage-induced margin pressure.

Spot Trading: No leverage or liquidation risk; PNL scales linearly with position size. Realized PNL only occurs upon selling an asset.

Derivatives Trading: PNL is calculated based on contract size and price movement; leverage does not change the formula itself but amplifies margin usage and risk exposure. When the mark price approaches your liquidation price, unrealized losses can rapidly increase and may trigger forced liquidation.

Example: If you go long 1 contract representing 0.01 BTC from $30,000 to $30,300, unrealized PNL ≈ (30,300 − 30,000) × 0.01 = $3. If funding fee is −$0.2 per interval, net unrealized PNL ≈ $2.8.

Why Are Fees and Funding Costs Included in PNL?

PNL reflects your net outcome—every cost related to trading impacts this result. Trading fees are incurred with each transaction and directly decrease your profits or increase your losses. Funding fees are periodic payments exchanged between long and short positions in perpetual contracts to keep prices anchored; these can accumulate significantly over time.

For example, in perpetual contracts, funding fees are typically settled every eight hours (as of 2025 on major exchanges). While holding a position, you pay or receive funding based on position size and funding rate. Even if your price direction is correct, consistently paying funding fees can erode net PNL.

In addition to fees and funding costs, slippage—the difference between expected and actual execution prices—can raise your cost basis or reduce gains, especially during periods of high volatility or low liquidity.

How to View and Use PNL on Gate

You can track your PNL on Gate’s asset and trading pages for risk management and strategy evaluation.

Step 1: View overall account-level PNL in your asset overview—analyze performance by day, week, or custom intervals.

Step 2: Check individual order or position-level PNL on spot and derivatives pages. The derivatives section typically displays unrealized PNL (calculated using mark price), realized PNL, liquidation price, and funding fee history.

Step 3: Monitor cumulative strategy PNL and maximum drawdown on grid trading and other strategy pages to assess whether parameter adjustments or pausing is needed.

Step 4: Export bills and fee details to verify that all trading and funding fees are included in calculations for consistent PNL accounting—this helps avoid misinterpretation.

In practice, you can use PNL data to set stop-loss/take-profit triggers or rebalancing rules. Combined with conditional orders or trailing stops, this supports effective risk control implementation.

What Is the Difference Between PNL and Return Rate?

PNL is an absolute value showing how much you have earned or lost in currency terms; return rate is a relative percentage that measures performance against invested capital. Both metrics are commonly used but serve different analytical purposes.

If you frequently add or withdraw funds, focusing solely on PNL may overlook time or cash flow effects; return rate provides clearer comparison across periods or strategies. Time-weighted returns eliminate the impact of cash flows for fairer benchmarking across accounts or strategies.

The connection: While PNL feeds into return calculations as foundational data, it’s recommended to monitor return rates, drawdowns, and volatility together when evaluating long-term strategy effectiveness.

How to Build a Risk Management Framework Using PNL

PNL data can be directly applied to actionable risk controls. Start by accurately tracking cost basis and all relevant fees; then use unrealized PNL to define thresholds and trigger conditions; finally, enforce these rules in order execution and position management.

Best practices include: maintaining up-to-date cost records; setting stop-loss/take-profit triggers at both trade and account levels based on PNL; incorporating all fees into daily or periodic net asset calculations; monitoring mark price and liquidation thresholds to avoid tail risks with leverage; regularly rebalancing positions to contain concentrated risk.

Both capital security and market risk are ever-present. Leverage can accelerate losses or even lead to liquidation. Regardless of your current PNL status, always factor in personal risk tolerance and capital planning before making decisions.

FAQ

My PNL is negative—what does that mean?

A negative PNL indicates your investment is currently at a loss—your holding’s market value has dropped below your purchase cost. For instance, if you bought 100 coins at 10 units each and the price falls to 8 units, your PNL would be −200 units. Negative PNL doesn’t require immediate selling—you should decide whether to hold or exit based on market outlook and personal risk tolerance.

Why does my realized profit show as positive but my account balance decreased?

This is due to transaction fees and other costs. Realized profit only reflects buy-sell price differences—not trading fees, withdrawal fees, or contract funding costs. On Gate’s transaction details page, you can see all fee deductions; actual account gain = realized profit – total costs.

Will unrealized PNL disappear while holding a position?

Unrealized PNL fluctuates in real time as market prices move. It only becomes realized profit/loss when you close your position. If the asset’s price falls below your entry cost, unrealized PNL becomes negative—this is just a paper loss until prices recover or you sell.

Why does contract trading cause faster changes in PNL compared to spot trading?

Contract trading involves leverage, so the same market move results in amplified changes to your PNL compared to spot trading. For example, with 5x leverage, a 1% price increase results in a 5% rise in your PNL. Contracts also incur funding fees that affect overall results—both risks and rewards are magnified.

How can I quickly assess whether to keep holding a position?

Consider realized profit/loss, unrealized profit/loss, capital usage costs, and your risk tolerance together. If unrealized gains already cover transaction fees and offer reasonable profit potential, it’s generally worth holding; if losses persist or technical signals deteriorate, consider stopping out. On Gate’s asset page you can monitor all positions’ live PNLs and cost bases for informed decision-making.