PNL is a key indicator of profit and loss: how to calculate trading results on the Binance cryptocurrency exchange

Every day, thousands of traders open positions in the cryptocurrency market, hoping to make a profit. But how do you know if your trading strategy is truly working? PNL is not just a technical metric — it’s your mirror that shows the real results of all your trading decisions. Without a clear understanding of this indicator, you’re just guessing how effective your actions are in the market.

PNL is primarily a tool for evaluating effectiveness

The abbreviation PNL stands for Profit and Loss. It’s a metric that reflects the difference between your initial investment and the current (or final) value of your position. Experienced traders use PNL constantly to build a clear picture of their trading activity.

It’s important to understand that PNL can be analyzed on different scales:

• for a single trade or an open position right now
• for a series of consecutive trades
• over a specific period (week, month, quarter)
• for all positions opened under one trading strategy

This analysis results in a P&L report that gives traders a complete view of where they are making money and where they are losing. This is critical for improving trading approaches.

Basic calculation formula: two schemes for long and short positions

PNL calculation depends on the type of open position. If you are trading long (betting on growth), the formula looks like this:

Unrealized PNL = (current price – entry price) × position size

If you have opened a short position (betting on decline), the formula changes:

Unrealized PNL = (entry price – current price) × position size

It’s important to distinguish between two types of PNL. Unrealized PNL is the “floating” profit or loss you would get only if you close the position right now. It’s a hypothetical result based on the current market price.

Once you click the “close position” button, unrealized PNL turns into realized PNL. Now it’s no longer a guess but a fact. You will receive exactly the profit or loss shown by the realized PNL, minus the exchange fee. On Binance, for a standard account (VIP 0), the fee is 0.1% of the trade amount.

How profit and loss are calculated in spot trading

In spot markets, everything is as transparent as possible. Suppose you bought 10 BTC at $30,000 each, then sold them at $40,000. What is your profit?

Using the formula: (40,000 – 30,000) × 10 = $100,000 — this is the unrealized result you saw before closing the position.

But after closing, you need to account for the fee. For buying: 30,000 × 10 × 0.1% = $300. For selling: 40,000 × 10 × 0.1% = $400. Total fee: $700.

So, your actual net profit = $100,000 – $700 = $99,300. This is the “closed” or realized P&L.

Similarly, a losing position is calculated. If you bought 10 BTC at $30,000 but sold at $20,000 (due to a wrong forecast), the unrealized loss would be: (20,000 – 30,000) × 10 = –$100,000.

Fees here: (30,000 × 10 × 0.1%) + (20,000 × 10 × 0.1%) = $300 + $200 = $500.

Final realized P&L = –$100,000 – $500 = –$100,500. Fees add to the loss, worsening the result.

Margin trading: the role of leverage in PNL calculation

When you switch to margin trading and use leverage, PNL calculation becomes more complex. Suppose your account has $1,000, but you borrow an additional $9,000 (leverage 10x) and trade assets worth $10,000 instead of your initial $1,000.

The formula becomes: PNL × leverage = (current price – entry price) × position size × 10

For example: you bought 10 LTC at $100 with 10x leverage, and the price rose to $110. Then:

Unrealized PNL × 10 = (110 – 100) × 10 = $100

This means that a rise in LTC from $100 to $110 doubles your initial investment! But keep in mind: this works both ways. If LTC drops to $90, your loss would be:

Unrealized PNL × 10 = (90 – 100) × 10 = –$100

Since you invested only $100 in this margin position, the loss has already wiped out your collateral. Binance will automatically liquidate your position to protect you from bigger losses. Therefore, margin trading requires very careful monitoring of your account’s total collateral.

Futures contracts and the specifics of mark price calculation

When trading futures on Binance, a special price — the “mark price” — is used instead of the simple market price. Why? Because it protects you from sudden price jumps and market manipulations that could trigger unexpected liquidations.

The formula for futures remains similar to spot and margin trading:

For longs: unrealized P/L = (mark price – entry price) × position size

For shorts: unrealized P/L = (entry price – mark price) × position size

But an important point: when trading futures, you need to constantly monitor your total margin collateral. The formula is:

Collateral = initial margin + realized PNL + unrealized PNL

If this amount falls below a certain threshold, the exchange will forcibly close your position (liquidate). The unrealized PNL fluctuates with price movements, so your margin collateral also changes every second. This means the liquidation threshold “floats.”

Built-in Binance calculators for quick calculations

To avoid manual calculations, Binance provides built-in calculators for each trading type.

Margin trading calculator is available directly on the margin trading page. You need to input:

• initial asset price
• target price
• your starting capital
• borrowed amount

After clicking “Calculate,” you’ll see PNL and ROE (return on investment).

Futures calculator is even more powerful. You can:

• select position type (long or short)
• specify entry and exit prices
• set the number of contracts
• choose leverage

The system will calculate not only PNL and ROE but also initial margin, target price (to reach your desired profit), liquidation price, maximum position size, and required balance to open the position.

Analyzing multiple trades: how to track overall effectiveness

If you have multiple positions open simultaneously, Binance automatically sums all unrealized PNLs. But the real measure of effectiveness comes from analyzing closed trades.

Suppose over a month, you made five trades with results: +$10,000, –$12,000, +$7,000, –$3,000, +$5,000.

Average realized PNL = (10,000 – 12,000 + 7,000 – 3,000 + 5,000) ÷ 5 = $1,400

This means your net profit for the month was $1,400. But this isn’t just a number — it’s an indicator that your trading system works. Moreover, such analysis helps you identify which types of positions generate more profit and which should be avoided.

Conclusion: PNL is the main indicator of your success

Profit and Loss is not just a formula; it’s a window into your trading effectiveness. Whether spot, margin, or futures trading on Binance, understanding PNL is fundamental trader literacy.

Learn to analyze this metric — and you gain direct control over your income and losses. You’ll be able to see which strategies work, which need adjustments, and how to manage your capital optimally. Remember: clear evaluation of results is the first step toward long-term profitability in the cryptocurrency market.