PnL Meaning
PnL stands for Profit and Loss.
It shows how much money you make or lose from a trade or from your account overall.
In simple words:
👉 PnL tells you if you are up or down.
- Positive PnL = profit
- Negative PnL = loss
Types of PnL
There are two main types of PnL traders see:
Unrealized PnL
- Profit or loss from open trades
- Changes as price moves
- Not final until the trade is closed
Realized PnL
- Profit or loss from closed trades
- Final result
- Affects your account balance
How PnL Changes
PnL is affected by:
- Entry price
- Exit price
- Position size
- Market movement
- Spread and fees
A small price move with a big position can change PnL very fast.
What Traders Should Know
PnL should not be watched alone.
Important points:
- A green PnL does not always mean good trading
- A red PnL does not always mean bad trading
- Risk control matters more than short-term PnL
- Consistent small gains are better than big swings
Good traders focus on process, not just PnL.
PnL in Prop Firm Trading
For prop firm traders, PnL is closely linked to rules.
PnL affects:
- Daily loss limits
- Maximum drawdown
- Profit targets
- Account survival
Many traders fail prop firm challenges because they chase PnL instead of managing risk.
A simple rule:
Protect the account first, profits come second.