Profit and Loss

In trading financial assets Whether it is currencies, stocks, or funds, the trader's investment goal is to make a profit from trading those assets. But on the other hand, there are also losses.

 

The meaning of Profit and Loss (P/L)

P/L can be divided into two main types:

1. Realized P/L and

2. Unrealized P/L or Floating P/L

 

Realized P/L

Realized P/L refers to the actual profit or loss incurred from trading assets. The numbers shown specify the exact amount of profit or loss. In other words, it is the profit/loss when the position is closed.

 

Unrealized P/L 

Unrealized P/L or Floating P/L, means profit or loss that has not yet been realized. The numbers shown are not actual totals. But it is profit or loss while the position is still open.

It is also called Floating P/L because the P/L value will change or fluctuate continuously all the time while your position is still open.

 

This profit/loss trader can view the total value on the Portfolio page.

 

Calculation 

For example, If you sell 100 shares of Stock A at 150 USD, the stock price later increases by 180 USD, and you decide to close the position. You will have profit/loss from closing the position as follows:

Realized P/L = Position Size x (Entry Price - Current Price)

 

Realized P/L = 100 x (150 - 180)

Realized P/L = 100 x (-30)

Realized P/L = - 3,000 usd

 

As you can see from trading this position, you will lose 3000 USD.

 

And if you buy 100 shares of Stock B at 200 USD, later the stock price drops to 180 USD, but you still refuse to sell because you hope that stocks will come back up. You will have unrealized profits/losses as follows:

Floating P/L = Position Size x (Current Price - Entry Price)

 

Floating P/L = 100 x (180 - 200)

Floating P/L = 100 x (- 20)

Floating P/L = - 2,000 usd

 

From trading this position, you will lose 2000 USD.

 

Understanding Profit/Loss is another important thing for management. Whether dealing with financial assets in business or even in your personal finances, remember that the goal is to make a good decision. which leads to long-term success.