Recently, someone asked me how to view their trading profits and losses, which made me think of something many beginners tend to overlook—PNL, or profit and loss. Simply put, PNL is how much you've earned or lost, and it’s the most direct indicator of trading performance.

In crypto trading, PNL is divided into two types. One is realized PNL, which is the profit or loss you lock in after closing a position. The other is unrealized PNL, also called paper gains or losses, which is the floating profit or loss calculated based on your open positions at current prices. These two concepts are especially important for understanding your account status.

There are several methods to calculate PNL, with FIFO and LIFO being the most common. FIFO stands for First-In, First-Out, assuming you sell the earliest bought coins first; this method is often used for tax reporting. LIFO, or Last-In, First-Out, can sometimes help you gain better tax advantages in highly volatile markets. There’s also the weighted average cost method, suitable for multiple entries, providing a more balanced cost basis.

I believe many traders don’t have stable profits because they haven’t developed the habit of regularly checking their PNL. Tracking PNL not only helps evaluate whether your strategy is effective but also allows you to discover trading patterns. For example, you might find certain periods where your win rate is particularly high, or specific coins where you always lose money. These insights are crucial for optimizing your strategy.

From a risk management perspective, PNL is also an important reference for setting stop-loss levels. You need to clearly define the maximum loss you can accept so that you can make rational decisions before emotions take over. Sometimes, seeing floating losses on your account can be upsetting, but if you have clear PNL goals and stop-loss plans, you can avoid being driven by fear or greed.

Most exchanges now have built-in PNL tracking features, which you can view directly on the trading interface. If you use multiple exchanges, third-party portfolio tracking tools can also be used; they usually automatically consolidate your holdings across different platforms. Some traders prefer to record their data in spreadsheets for more detailed control.

Ultimately, PNL is not just a number; it reflects whether your trading decisions are correct. Regularly analyzing your PNL is like giving your trading system a health check. You’ll know which strategies to stick with and which to abandon, which is especially important for surviving longer in this highly volatile market.