What is the difference between realized and unrealized PnL on a contract?

Understanding Realized and Unrealized PnL in Crypto Derivatives

In the fast-moving world of cryptocurrency trading, especially within futures and perpetual contracts, understanding profit and loss (PnL) is critical. Traders must distinguish between realized and unrealized PnL to assess performance accurately and manage risk effectively.

Differences Between Realized and Unrealized PnL

How Realized PnL Works

The Nature of Unrealized PnL

Impact on Margin and Risk Management

Frequently Asked Questions

What happens to unrealized PnL when I add to an existing position?Adding to a position recalculates the average entry price. The unrealized PnL updates based on the new average and current market price. The system combines both old and new quantities under one adjusted cost basis.

Can unrealized PnL become negative even if my entry was profitable?Yes. If the market reverses after entry, the unrealized PnL turns negative regardless of initial expectations. This does not affect your balance until the position is closed.

Is realized PnL always visible in my transaction history?Most exchanges record every closed trade with its realized PnL in the transaction ledger. This includes both gains and losses, along with associated fees and funding costs.

Does funding rate impact realized PnL?Funding payments made or received while holding a perpetual contract are included in realized PnL upon closure. Long positions pay funding in rising markets; shorts pay in falling ones, affecting net results.