What is PNL? Distinguishing Realized and Unrealized PNL in Crypto Trading

1. What is PNL?

PNL (Profit and Loss) represents the gains or losses from investments. In the crypto market, PNL helps investors track the difference between the initial investment value and the current value of assets. Understanding PNL aids in evaluating performance and making informed decisions.

2. Distinguishing Realized and Unrealized PNL

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• Realized PNL: The profit or loss confirmed after selling an asset. For example, buying ETH at $1,000 and selling at $1,500 results in a Realized PNL of $500 profit.

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• Unrealized PNL: The potential profit or loss based on current market price without selling the asset. For instance, purchasing BTC at $20,000 with a current price of $25,000 yields an Unrealized PNL of $5,000 potential profit.

3. Importance of Monitoring PNL

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• Performance Evaluation: PNL indicates the success level of investment strategies.

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• Risk Management: Tracking PNL facilitates timely decisions on taking profits or cutting losses.

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• Investment Planning: A clear understanding of PNL assists in adjusting portfolios and strategies.

4. Applying PNL in Futures and Margin Trading

In Futures and Margin trading, PNL helps investors monitor profits and losses of open and closed positions, enhancing risk management