I just saw that many beginners in crypto still don't really understand what PNL is in finance, so I decided to share my way of viewing it.

Basically, PNL (Profit and Loss) is your trading thermometer. It tells you whether you made or lost money on a trade. End of story.

Think of it like this: you bought a coffee for 50 pesos and sold it for 70. You made 20 pesos. That’s your positive PNL. If you sold it for 40, you lost 10 pesos. Negative PNL. The stock market works the same way, only instead of coffee, we're talking about Bitcoin, Ethereum, or whatever.

The formula is simple: Sale price minus purchase price, multiplied by the amount you bought. Oh, and don’t forget to subtract the exchange fees, because that also affects your actual profit.

Look at this real example: I bought 0.1 BTC at $40,000 (invested $4,000). Then I sold it at $42,000 (received $4,200). Paper profit was $200, but after fees, it was $198. That’s my PNL.

Now, there are two types of PNL that are important to differentiate. There’s Unrealized PNL, which is your gains or losses while the position is still open (you haven't sold yet). And the Realized PNL, which is what you actually gained or lost once you closed the trade.

What many don’t understand is that your PNL is also related to other things: ROI (your profitability percentage), the margin you put up as collateral, and the leverage you used. If you trade with leverage, your PNL can change drastically because the price moves faster relative to your initial investment.

The interesting part is that in decentralized finance or on exchanges like this, you can see your PNL in real time. Some traders live by that. I prefer to see it as just another metric, not the only one.

If you’re just starting out, the important thing is to understand that PNL is simply the difference between what you paid and what you sold. Positive = profit, negative = loss. The rest are just technical details that you’ll master with experience.