Do you know when you enter a trade and want to know exactly how much you've gained or lost? Well, that's basically what we call PnL. If you've already traded in the traditional market, the concept is similar, but in crypto there are specific nuances that are worth understanding well.

PnL is nothing more than the change in the value of your positions over a period. It sounds simple, but when you start trading cryptocurrencies, understanding exactly how to calculate this makes all the difference. Without knowing your PnL precisely, it's easy to get lost and not know if you're doing well or poorly in your trades.

Let's start with some important terms. There is MTM, which is the valuation of an asset based on the current market price. If you have Bitcoin, its value fluctuates as the market price changes. There's also realized PnL, which is the profit or loss you've actually closed by selling. And unrealized PnL, which is the profit or loss you have on open positions that you haven't sold yet.

To do the basic calculation, just take today's price minus yesterday's price. If ETH was $1,950 yesterday and today it's $1,970, your PnL is a $20 profit. That's it. But if it drops to $1,980, then it's a $10 loss.

Now, when we talk about future value, it's different. It’s how much a coin will be worth at a future time. For example, if you invest $1,000 in TRX with an annual return of 4%, after a year you'd have $1,040. The present value is $1,000 and the future value is $1,040. This helps you plan your investments better.

There are three main methods to calculate your investment PnL. The first is FIFO, which means First In, First Out. You use the price of your first purchase as the basis. Say you bought 1 ETH at $1,100, then bought another at $800, and sold one at $1,200. Using FIFO, your profit would be $100 because you'd consider the $1,100 purchase as the basis.

Next is LIFO, Last In, First Out. Here, you use the most recent price. In the same example, your profit would be $400 because you'd use the $800 as the cost basis.

And there's the weighted average cost method, which is very useful when you buy multiple times. You sum all costs, divide by the total units, and use that as the basis. If you bought 1 BTC at $1,500 and then another at $2,000, your average cost is $1,750. If you sell at $2,400, your profit is $650.

For perpetual contracts, which have no expiration date, you need to calculate realized and unrealized PnL separately, then add both together. This gives a complete view of your performance.

There are also simpler ways to track your performance. Year-to-date, for example, compares your portfolio value at the start of the year with its current value. If you had $1,000 in ADA at the beginning of January and now have $1,600, you've gained $600 in unrealized profit.

And there's the percentage profit, which shows your return as a percentage. If you bought BNB at $300 and sold at $390, you made $90. Dividing 90 by 300 and multiplying by 100 gives you a 30% return.

The important thing to remember is that these simplified calculations do not account for fees, taxes, and volatility. In practice, you need to consider all of these. But understanding what PnL is and how to calculate it is the first step to becoming a more conscious trader and making better decisions in the future.