Crypto P&L: The Guide Every Trader Needs (But No One Explains Well)

Have you ever closed a position and weren’t quite sure if you made a profit or a loss? Welcome to the club. Crypto PnL (Profit and Loss) isn’t just about subtracting numbers — it’s about understanding what’s really happening with your money.

The Basics Without Jargon

PnL = change in your position’s value over a specific period. That’s it. No more complicated.

There are two types:

• Realized PnL: when you close the position and actually lock in the gain or loss
• Unrealized PnL: what you could gain or lose if you sold now — also called “paper profit/loss”

Simple example: You bought 1 ETH at $1,900. Today it’s trading at $1,600. You have an unrealized loss. If you sell at this price, that loss becomes realized.

How to Calculate Your Real PnL

The basic formula is straightforward:

PnL = Current Price – Purchase Price

But here’s the tricky part: what’s your “purchase price” if you bought multiple times?

There are three main methods:

1. FIFO (First In, First Out)
Use the price of your earliest purchase.
Example: Bought 1 ETH at $1,100, then another at $800, and sold 1 at $1,200.
Your gain: $1,200 – $1,100 = $100.

Pros: Simple.
Cons: Many countries require FIFO for tax purposes, but it might not always give you the best PnL.

2. LIFO (Last In, First Out)
Use the price of your most recent purchase.
Same example: bought at $1,100 and $800, sold at $1,200.
Gain: $1,200 – $800 = $400.

Pros: Better for managing taxes in some cases.
Cons: Less intuitive.

3. Weighted Average Cost
Average all your purchase prices.
Example: Bought 1 BTC at $1,500 and another at $2,000.
Average cost: ($1,500 + $2,000) / 2 = $1,750.
If you sell at $2,400, your gain: $2,400 – $1,750.

Pros: Reflects your actual position better.
Cons: More calculations involved.

Metrics You Can’t Ignore

Mark-to-Market (MTM):
It’s simply the current value of your asset based on the market price.
If ETH was valued at $1,970 yesterday and now is $1,950, your daily PnL is -$20.

Percentage Gain/Loss:
Your profit or loss as a percentage.
Example: Bought BNB at $300, sold at $390.
Profit: $90.
Percentage: ($90 / $300) × 100 = 30%.
This number is often more meaningful than the raw dollar amount because it shows efficiency.

PnL in Perpetual Contracts (Derivatives)

With perpetuals, it’s different because you can hold a position indefinitely. You need to calculate:

• Realized PnL: what you’ve already closed
• Unrealized PnL: current profit/loss of your open position
• Total PnL: sum of both

Also, don’t forget about funding fees — the cost of maintaining leverage. These fees can eat into your gains if you’re not monitoring them.

Year-to-Date (YTD) Metrics

YTD shows your performance since January.
Did you have $1,000 in ADA on January 1, 2022, and $1,600 on January 1, 2023?
Your unrealized gain YTD is $600.
Useful for seeing your overall progress.

What No One Mentions But Matters

These simplified calculations don’t include:

• Trading fees (which can be 0.1% to 1% per trade)
• Taxes (which vary by country but can be significant)
• Market volatility (timing your entries/exits)
• Slippage on large orders

In real life, professional traders use automated tools — spreadsheets, tracking bots, specialized platforms — because manually calculating 50+ trades is a pain.

The Point

Understanding PnL isn’t just about math — it’s about visibility. Knowing exactly where you stand allows you to:

1. Evaluate if your strategy works
2. Adjust before losing more
3. Make data-driven decisions instead of reacting out of fear

Winning traders don’t succeed by luck. They succeed because they understand every number behind their trades. You should do the same.