Profit & Loss (P&L)

Profit and loss (P&L) is the net financial result of your trading activity. Realized P&L comes from closed trades — it's locked in and adds to (or subtracts from) your account balance. Unrealized (floating) P&L comes from open positions and changes with every price movement until you close the trade.

Tracking P&L effectively means looking beyond just the dollar amount. Key metrics include: profit factor (gross profit ÷ gross loss), win rate, average win vs. average loss, and maximum drawdown. A trader who wins 40% of the time can still be very profitable if their average win is three times their average loss — and vice versa.

One important mental shift: stop thinking of P&L per trade and start thinking of P&L per 100 trades or per month. Individual trades are random. You'll have losses — many of them. What matters is whether your edge plays out over a statistically meaningful sample. A losing day or even a losing week says nothing about the quality of your strategy.