Trading cryptocurrency becomes manageable when you master calculating unrealized and realized PNL (Profit and Loss). These metrics are vital for portfolio management and strategic decision-making. This guide explores PNL fundamentals, calculation methods, and their practical applications in crypto trading.
What Is PNL in Crypto Trading?
PNL stands for Profit and Loss, reflecting the financial outcome of your trades. Selling an asset above purchase price yields profit; selling below results in loss. Simple in concept, PNL splits into two types: unrealized and realized.
Understanding Unrealized PNL
Unrealized PNL represents potential profit/loss based on current market prices versus your entry price. It’s "unrealized" because you haven’t closed the position yet.
Example Scenario
- Buy: 1 BTC at $30,000
- Current Price: $35,000
- Unrealized PNL: $5,000 (potential profit)
👉 Discover how leverage impacts unrealized PNL
Understanding Realized PNL
Realized PNL is the actual profit/loss after closing a trade. It’s settled and reflected in your account balance.
Example Scenario
- Sell: BTC at $35,000 (from $30,000 purchase)
- Realized PNL: $5,000 (locked profit)
Calculating Unrealized PNL in Perpetual Trading
Formula:
Unrealized PNL = (Mark Price – Entry Price) × Position Size × Leverage
Step-by-Step Calculation
- Entry Price: Position opening price (e.g., $30,000).
- Mark Price: Current reference price (e.g., $32,000).
- Position Size: Asset quantity (e.g., 1 BTC).
- Leverage: Multiplier (e.g., 10x).
Example:
$(32,000 – 30,000) × 1 × 10 = **$20,000* (unrealized profit)
*Excludes exchange fees.
Calculating Realized PNL in Perpetual Trading
Formula:
Realized PNL = (Exit Price – Entry Price) × Position Size × Leverage – Funding Fees
Step-by-Step Calculation
- Exit Price: Position closing price (e.g., $32,000).
- Funding Fees: Cumulative costs (e.g., $200).
Example:
$(32,000 – 30,000) × 1 × 10 – $200 = $19,800 (realized profit)
Key Differences: Unrealized vs. Realized PNL
| Factor | Unrealized PNL | Realized PNL |
|---|---|---|
| Status | Potential (open position) | Actual (closed position) |
| Impact | Affects margin balance | Updates account balance |
| Liquidation Risk | Yes (if margin falls) | No (position closed) |
👉 Learn how to mitigate liquidation risks
Factors Influencing PNL in Perpetual Trading
- Price Volatility: Rapid swings alter unrealized PNL abruptly.
- Leverage: Amplifies profits/losses (e.g., 10x = 10× exposure).
- Funding Fees: Recurring costs affecting realized PNL.
Common PNL Calculation Mistakes
- Using Last Price Instead of Mark Price: Mark price prevents manipulation skew.
- Ignoring Funding Fees: Overestimates realized profits.
- Neglecting Leverage: Misrepresents true PNL impact.
Conclusion
Mastering unrealized and realized PNL calculations—especially with leverage—is critical for risk management and profitability in crypto trading. Accurate tracking helps avoid liquidation and optimizes strategic decisions.
Frequently Asked Questions
How is unrealized PNL calculated?
It’s the profit/loss of an open position, based on current market price vs. entry price. Becomes realized upon closing the trade.
How to calculate PNL in crypto?
Realized PNL = (Sell Price – Buy Price) × Quantity – Fees. Example: Buy SOL at $70, sell at $105 → $35 profit.
Is PNL the same as account balance?
No. PNL reflects trade performance; account balance includes all funds. Unrealized PNL affects margin balances dynamically.
What impacts PNL most?
Leverage, funding rates, and market volatility are primary drivers.