I just saw many beginners confused about this term, so let me explain what PNL is in trading in simple terms.

Basically, PNL is your financial thermometer in each trade. It’s the difference between what you paid for an asset and the price at which you sold it. Sounds easy, right? Well, it is.

Let’s take a real example: say you bought 0.1 BTC at $40,000, so you spent $4,000. Then you sold it at $42,000 and received $4,200. Your gross profit was $200, but after exchange fees, it was $198. That’s your positive PNL.

Now, if you had sold at $38,000, you would have lost money. That would be a negative PNL. It’s that straightforward.

The formula you need to remember is super simple: Sale Price minus Purchase Price, multiplied by the amount of the asset, minus fees. That gives you your PNL.

Here’s the interesting part: there are two types of PNL you should know. Unrealized PNL is when your position is still open and the gains or losses only exist on paper. Realized PNL is when you’ve closed the trade and the money has entered or left your account. The difference is important because one thing is seeing gains on the screen and another is having them in your pocket.

Many novice traders get excited seeing unrealized positive PNL and then lose everything when the price moves against them. That’s why some use leverage, which amplifies your PNL in both directions. If you win, you win more. If you lose, you lose more too.

Think of it like this: it’s like buying a coffee for 50 pesos and selling it an hour later for 70. Your PNL would be +20. If you sold it for 40, your PNL would be -10. In the stock market, it’s exactly the same, only the numbers are bigger and everything happens much faster. That’s why understanding what PNL is in trading is essential before risking your money.