PNL stands for **profit and loss**, and it can be either **realized** or **unrealized**. It can be used to describe the change in the value of a trader’s positions.

**Realized PNL**is calculated based on your closing price and entry price. It refers to the profit or loss that originate from closed positions.**Unrealized PNL**is calculated based on the current market rate of the asset. It refers to the profit or loss that is still changing in response to market moves for open positions.

To explain PNL, I will use an analogy of buying and selling coins of a project XYZ. For example:

- Suppose you buy 100 coins of XYZ at $10 each, and the current market price is $12. Your unrealized PNL is ($12 – $10) x 100 = $200, meaning you would make $200 if you sell now.
- If you decide to sell 50 coins at $12, your realized PNL is ($12 – $10) x 50 = $100, meaning you have made $100 from this transaction. Your unrealized PNL for the remaining 50 shares is still ($12 – $10) x 50 = $100.
- If the market price drops to $8, your unrealized PNL for the remaining 50 coin becomes ($8 – $10) x 50 = -$100, meaning you would lose $100 if you sell now.
- If you decide to sell the remaining 50 coins at $8, your realized PNL is ($8 – $10) x 50 = -$100, meaning you have lost $100 from this transaction. Your total realized PNL for all 100 coins is $100 – $100 = $0, meaning you have broken even.