Understanding how profits and losses are calculated is crucial before opening any trading position. This guide will walk you through the key variables that impact P&L calculations in USDT-based perpetual contracts.
1. Average Entry Price
Your average entry price updates dynamically when adding to a position. Here’s how it works:
Formula:
Average Entry Price = Total Contract Value (USDT) / Total Contract Quantity
Example:
Trader A holds:
– 0.5 BTC long at $5,000
– Later adds 0.3 BTC at $6,000
Calculation:
Total Value = (0.5 × 5000) + (0.3 × 6000) = $4,300
Total Quantity = 0.5 + 0.3 = 0.8 BTC
Average Price = 4300 / 0.8 = $5,375
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2. Unrealized P&L
This reflects your position’s floating profit/loss before closing. Calculations differ for long vs. short positions.
Long Position Formula
Unrealized P&L = Quantity × (Mark Price − Entry Price)
Example:
0.2 BTC long at $7,000 → Mark price reaches $7,500
P&L = 0.2 × (7500 − 7000) = +100 USDT
Short Position Formula
Unrealized P&L = Quantity × (Entry Price − Mark Price)
Example:
0.4 BTC short at $6,000 → Mark price drops to $5,000
P&L = 0.4 × (6000 − 5000) = +400 USDT
Key Notes:
- USDT contracts settle in USDT (unlike coin-margined contracts)
- Leverage affects required margin but doesn’t directly amplify P&L
- Default display uses mark price; hover to see index-price-based P&L
- Excludes trading fees and funding costs
2A. Unrealized P&L Percentage
Measures ROI based on position margin:
P&L % = (Unrealized P&L / Position Margin) × 100%
Position Margin = Initial Margin + Closing Fee
Example:
Using the 0.2 BTC long position ($7,000 entry, 10× leverage):
– Initial Margin = (0.2 × 7000)/10 = 140 USDT
– Closing Fee = 0.693 USDT
– P&L % = 100/(140 + 0.693) × 100% = 71.07%
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3. Realized P&L (Closed Position)
Final profit/loss after accounting for all costs:
Formula:
Realized P&L = Position P&L − Opening Fee − Closing Fee − Total Funding Paid/Received
Example:
0.4 BTC short at $6,000 → Closed at $5,000:
– Position P&L: +400 USDT
– Fees: 1.32 (open) + 1.10 (close) + 2.10 (funding) = 4.52 USDT
– Net Realized P&L = 400 − 4.52 = 395.48 USDT
4. Cumulative Realized P&L
Tracks all closed portions of a position over time:
Formula:
Cumulative P&L = Σ(Closed Position P&L) − Trading Fees − Funding Fees
Partial Close Example:
Closing 0.3 BTC of a 0.4 BTC short:
– Position P&L: 300 USDT
– Fees: 1.32 (open) + 0.825 (close) + 1.50 (funding) = 3.645 USDT
– Realized P&L = 300 − 3.645 = 296.355 USDT
Key Differences Summary
| Metric | Includes Position P&L? | Includes Fees? | Includes Funding? |
|---|---|---|---|
| Unrealized P&L | Yes | No | No |
| Realized P&L | Yes | Yes | Yes |
| Cumulative P&L | Yes | Yes | Yes |
FAQ
Q: Does higher leverage increase profits?
A: No. Leverage only reduces required margin – profits depend on position size and price movement.
Q: Why does my P&L% change when adjusting leverage?
A: P&L% calculates ROI against margin. Higher leverage means less margin, thus higher percentage.
Q: How are partial closes accounted for?
A: Fees and funding costs are proportionally allocated to the closed portion.
Q: What’s the difference between realized and cumulative P&L?
A: Realized P&L shows single-closure results; cumulative tracks all activity until full position closure.
Q: Are stop-loss orders included in P&L calculations?
A: Yes, they trigger a closure that generates realized P&L.
Q: How often should I monitor unrealized P&L?
A: Regularly, but avoid overreacting to short-term fluctuations – focus on your trading plan.