Recently, someone asked me what exactly PNL is in finance, and I realized that many new traders don’t even fully understand this basic concept. So let me explain it in the simplest way possible.

PNL is Profit and Loss, that is, gains and losses. Basically, it’s what you earn or lose when you make a trade in the market. Nothing more, nothing less. It’s like your personal financial thermometer.

The math is super simple: you subtract the price you bought at from the price you sold at, and that’s it. If the number is positive, you made a profit. If it’s negative, you lost. Of course, you need to deduct the commissions charged by the exchange, but that’s the general idea.

Let’s put a real example. Imagine you bought 0,1 BTC at 40,000 dollars. You spent 4,000. Then you sold it at 42,000 and received 4,200. Your gross profit was 200 dollars, but after the commissions you ended up with around 198. That’s your PNL. Simple, right?

Now, there’s an important detail that many people forget: there’s unrealized PNL and realized PNL. Unrealized is what you could theoretically gain or lose if you close your position right now. Realized is what you’ve already closed and what is truly yours. The difference is crucial because one thing is seeing green numbers on the screen, and another is actually having sold.

What’s interesting in finance is understanding that PNL also depends on the size of your position and the leverage you use. If you trade with leverage, the numbers are multiplied, so your gains can be bigger—but so can your losses. That’s why you need to be careful.

In summary, PNL is just the difference between what you invested and what you took out. It’s not complicated, but it’s essential that you understand it well if you’re going to trade seriously. It’s the most important metric for knowing whether your strategy really works or not.

That’s all. PNL, gains and losses. There you have what you need to start monitoring your trades properly.