If you're serious about crypto trading, here's something most people get wrong: they don't actually know what is pnl, and it costs them. I see it all the time—traders making moves without understanding whether they're actually up or down.

Look, PnL stands for profit and loss, and it's basically how you measure if your trading is working. But in crypto, it's not as simple as traditional finance. You've got realized PnL, unrealized PnL, mark-to-market pricing... it gets messy fast. Without getting this right, you're flying blind.

Let me break down what matters. First, there's mark-to-market—that's just the current market price of what you're holding. Say you bought ETH at $1,900 but the mark price is now $1,600. That unrealized loss of $300 is sitting in your open position. It hasn't been locked in yet, which is why it's called unrealized. The second you close that position and sell, boom—that becomes realized PnL.

Now, the calculation methods. Most traders use one of three approaches. FIFO (first-in, first-out) assumes you sell what you bought first. LIFO (last-in, first-out) does the opposite. Then there's weighted average cost, which splits the difference. Here's why it matters: if you bought 1 BTC at $1,500 and another at $2,000, then sold at $2,400, your PnL changes depending on which method you use. FIFO gives you $900 profit, LIFO gives $400, weighted average gives $650. Same trade, totally different numbers.

For perpetual contracts, you need to calculate both realized and unrealized PnL together to get your actual total. Add in funding rates and trading fees in real life, and suddenly you realize what is pnl calculation isn't just math—it's critical for understanding if your strategy actually works.

Honestly, most traders skip this analysis and wonder why they're not making money. The ones who track their performance systematically—whether through spreadsheets or automated tools—they're the ones who actually improve. You can't optimize what you don't measure. Start tracking what is pnl for each trade, analyze it regularly, and you'll spot patterns in your trading that make or break your results. That's how you move from random guessing to actual strategy.