Profit and LossP&L
Profit and loss (P&L) is how much a trade or account has gained or lost, after costs, measured in money or as a percentage.
Every trade ends in a number: how much you made or lost. That number, profit and loss or P&L, sounds simple, but beginners often get it wrong by forgetting fees, mixing up percentages, or ignoring trades that are still open. This entry shows how to calculate P&L for long and short trades, how costs change the result, and why percentages need care.
- Category
- Trading Basics
- Reading time
- 4 min
- Also called
- PnL, P/L, Trading P&L
- Updated
Profit and loss in plain words
For a long trade, P&L is the exit price minus the entry price, times the quantity, minus costs.1 For a short trade, it is the entry minus the exit. See Long Position and Short Selling.
P&L on an open position is unrealised: it changes with every price move. It becomes realised only when you close the trade. See Realized and Unrealized P&L.
How to calculate P&L, step by step
Find the price difference
Long: exit − entry. Short: entry − exit.
Multiply by size
Shares, coins or contracts × contract multiplier.
Subtract all costs
Commissions, spreads, fees and any financing or borrowing costs.2 See Trading Fees and Commissions.
Convert currency if needed
If the asset trades in another currency, convert the result.
Express it as a percentage
Net P&L ÷ capital used (or ÷ account size for account-level returns).
Record it in R as well
P&L ÷ initial risk shows the result relative to what you risked. See R-Multiple.
Worked examples
Example 1 — A long trade with costs
ProfitBuy 100 shares at $25.00, sell at $27.50. Commission $2 each way.
| Gross P&L | 100 × $2.50 = $250 |
| Costs | $4 |
| Net P&L | $246 |
| Return on capital | $246 ÷ $2,500 = 9.8% |
Always subtract costs: gross numbers flatter results.
Example 2 — A short trade
LossShort 50 shares at $80, buy back at $86. Borrowing fee $6.
| Price move against you | $6 per share |
| Gross P&L | 50 × −$6 = −$300 |
| Net P&L | −$306 |
For shorts, a price rise is a loss, and borrowing costs add to it. See Borrowing Fee.
Example 3 — Percentages do not add up
ArithmeticAn account of $10,000 loses 20%, then gains 20%.
| After −20% | $8,000 |
| After +20% | $9,600 |
| Net result | −4% |
Losses need larger percentage gains to recover.3 Track money, not just percentages. See Drawdown.
Ways to state P&L
| Aspect | Shows | Watch out for |
|---|---|---|
| Money (gross) | Raw price result | Ignores costs |
| Money (net) | What you actually keep | Taxes are usually separate |
| Percentage | Comparable across sizes | Choice of base changes the number |
| R-multiple | Result relative to risk | Needs a defined stop |
Why accurate P&L matters
Judging a strategy
Net results decide whether a method works. See Expectancy.
Risk control
Daily P&L feeds loss limits. See Daily and Weekly Loss Limits.
Record keeping
Every trade belongs in a journal. See Trading Journal.
Taxes
Realised gains and losses are usually what is reported.
Advantages and disadvantages
Advantages
- The most direct measure of trading results.
- Simple formula for long and short trades.
- Combines with R-multiples to judge quality.
Disadvantages
- Easy to overstate by ignoring costs.
- Percentages can mislead when bases differ.
- A single trade’s P&L says little about skill.
- Unrealised P&L can vanish before you close.
Going deeper
Read as far as you need. Each level builds on the one before it.
Small costs add up
Beginner
A few dollars per trade looks harmless, but over hundreds of trades it can turn a small edge into a loss. See Bid-Ask Spread.
Leverage and return on margin
Intermediate
With leverage, P&L is often quoted on the margin posted, which makes percentages look huge. Measure against the whole account for an honest picture. See Leverage.
Mark-to-market
Advanced
Futures accounts settle P&L daily, so gains and losses move cash in and out of the account every day even before you close. See Futures Contract.
Common mistakes
Forgetting costs
Include every fee, spread and financing charge.
Counting open profit as banked
Unrealised gains can disappear.
Averaging percentages
Compound them instead.
Judging by one trade
Look at results over many trades.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Long P&L = (exit − entry) × size − costs; short reverses the price difference.
- Net P&L after all costs is what counts.
- Unrealised P&L is not money in hand.
- Percentages compound; they do not simply add.
- Judge results over many trades, ideally in R.
Frequently asked questions
What is the difference between gross and net P&L?
Is unrealised profit real?
Should I track P&L in money or percent?
Further learning
- R-Multiple
Measuring results relative to risk.
- Expectancy
Average P&L per trade over time.
- Drawdown
Why losses are hard to recover.
- Trading Journal
Where P&L should be recorded.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Investor.gov (SEC). Stock Purchases and Sales: Long and Short (opens in a new tab) Checked .
- Investor.gov (SEC). Commissions (glossary) (opens in a new tab) Checked .
- CME Group. Controlling Risk (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.