Recently, I saw many beginners in the community asking a question: What does pnl in crypto actually mean?

In fact, this concept is especially important for traders, but many people don't understand it clearly at first.
Let me share my understanding.

Simply put, pnl is your profit or loss.
But there are many details that need to be clarified.
For example, you bought 1 ETH for $1970, and the next day it rose to $1990, the $20 difference is your pnl.
It sounds simple, but in actual operation, it's far more than that.

First, you need to understand the concept of MTM, which is valuing your position based on market prices.
The value of each coin you hold fluctuates with market prices.
This is the basis for calculating pnl.
A key formula is: today's market price minus yesterday's market price equals your pnl change.

But here, there are two situations.
One is realized profit and loss, which means you actually sold and received the money.
For example, you bought DOT at $70 and sold it at $105, which is a $35 profit—this is a real profit or loss.
The other is unrealized profit and loss, which means you haven't sold yet, just on paper.
For example, you bought ETH contracts at $1900, and now the mark price is $1600, so you have an unrealized loss of $300.
These two concepts are easy to confuse, but they have a big impact on trading decisions.

Regarding how to calculate pnl, there are actually several methods.
FIFO (First-In, First-Out) calculates based on your earliest purchase price,
LIFO (Last-In, First-Out) uses the most recent purchase price,
and there’s also the weighted average cost method.
Taking FIFO as an example, suppose Bob bought 1 ETH at $1100 first, then bought another at $800.
A year later, he sells 1 ETH at $1200.
Using FIFO, the initial cost is $1100, and selling at $1200 yields a profit of $100.
But if you use LIFO, the initial cost becomes $800, and the profit is $400.
The same transaction can yield very different results depending on the method used.

There’s also a practical calculation called year-to-date (YTD), which is especially suitable for long-term holders.
For example, if you held $1000 worth of ADA on January 1, 2022, and by January 1, 2023, it’s worth $1600, that’s a $600 unrealized profit.
This method helps you clearly understand your long-term investments.

If you don’t have many trades, you can calculate pnl for each trade individually.
Or look at profit percentage—for example, if you bought BNB at $300 and sold at $390, the profit is $90, which is a 30% return.
This makes it easier to compare the efficiency of different trades.

For perpetual contract traders, pnl calculation is a bit more complex.
You need to add both realized and unrealized profits and losses, and also consider trading fees and funding rates.
But the core logic remains the same.

Honestly, truly understanding pnl is very helpful for trading.
It not only helps you see how much you’ve earned or lost but also allows you to evaluate whether your trading strategy is effective.
Many trading tools and bots can automatically calculate these, but understanding the principles yourself is more important.
Only then can you truly grasp what the data means when you see it, rather than being overwhelmed by numbers.
If you're interested, you can try it on Gate, practicing these calculations with real market data to deepen your understanding.