Many people are still confused about what PNL is when they start trading. Actually, the concept is simple—it's the financial thermometer of every transaction you make.

To put it simply, imagine you buy a coffee for 50 thousand, then sell it to a friend for 70 thousand. That 20 thousand difference is your PNL—profit. Conversely, if you sell it for 40 thousand, that’s also PNL, but with a minus sign, meaning a loss. On a crypto exchange, the mechanism is exactly the same—only the numbers are larger and it moves much faster.

So what is PNL technically? PNL is an abbreviation for Profit and Loss, which is the difference between the purchase price and the selling price of an asset, after subtracting transaction fees. The formula is very straightforward: selling price minus purchase price, multiplied by the quantity of the asset, then subtract the fee. The result can be positive (profit) or negative (loss).

For example, you buy 0.1 BTC for 40 thousand dollars—meaning you spend 4 thousand dollars. Then the price rises and you sell it for 42 thousand dollars, so you get 4,200 dollars. Before deducting the exchange fee, the profit is 200 dollars. But after deducting the fee, your PNL becomes around 198 dollars.

There are also terms you need to understand. Unrealized PNL is profit or loss that hasn’t been realized yet—your position is still open, so the figure is still fluctuating. Realized PNL is profit or loss that’s already final, after you close the position. If you use leverage, the PNL number can change drastically due to price fluctuations—this is called volatile PNL.

The key takeaway is that understanding PNL is the first step toward becoming a more mindful trader. It’s not just about knowing profit or loss, but about understanding how every trading decision impacts your wallet. So next time you see PNL on the chart, you’ll already know what it means.