Basic Knowledge to Invest

The most important thing in investing is profit or loss, also known as P/L.

 

P/L can be divided into 2 main types:

1. Realized P/L 

Realized P/L is the actual profit or loss resulting from trading assets. The numbers shown indicate the exact profit or loss amount, in other words, the profit/loss after closing a position.

 

 

2. Unrealized P/L 

Unrealized P/L is the profit or loss that has not yet been realized from trading assets. The numbers shown are not the actual profit or loss but are the profit/loss while the position is still open. Additionally, Unrealized P/L is displayed as a percentage to indicate the percentage of profit or loss.

 

 

Example of Calculating Profit/Loss.

Profit and loss can be calculated for both Realized P/L and Unrealized P/L.

 

For example, if you buy stock A at a market price of $50 and invest $1,000, you will receive 20 units. If you close the position at a market price of $60, what will be your profit/loss?

Using the formula P/L = (Close Price - Open Price) x Units x Exchange Rate

    P/L=(60−50)×20×1

    P/L=(10)×20×1

    P/L= $200

 

 

And if calculating % Unrealized P/L.

Using the formula %UnrealizedP/L = (UnrealizedP/L divided by Amount) x 100

    % Unrealized P/L = (200/1,000) x 100

    % Unrealized P/L = 0.2 x 100

    % Unrealized P/L = 20%

 

 

 

In this lesson, we explain what Profit/Loss means. The difference between Realized P/L and Unrealized P/L and how it is calculated in asset trading. Because these contents are important for management Maintaining your portfolio is very important.

 

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