Profit and Loss (P&L) is the financial result of your trading activity. Understanding P&L is fundamental to tracking your trading performance.
Types of P&L
| Type | Description |
|---|---|
| Realized P&L | Profit/loss from closed trades |
| Unrealized P&L | Floating profit/loss on open positions |
| Total P&L | Realized + Unrealized |
P&L Calculation (Forex)
Formula: P&L = (Exit Price - Entry Price) × Lot Size × Pip Value
Example:
- Buy EUR/USD at 1.0850
- Sell at 1.0950
- 1 standard lot (pip value = $10)
- P&L = 100 pips × $10 = $1,000 profit
Tracking P&L
- Win rate — % of profitable trades
- Profit factor — Gross profit / Gross loss
- Risk-reward ratio — Average win / Average loss
- Expectancy — (Win rate × Avg win) - (Loss rate × Avg loss)
Key Points
- Only realized P&L changes your balance
- Unrealized P&L can turn negative at any time
- Track P&L per trade and cumulative
- Use a trading journal for detailed records