PnL calculations
PnL (“profit and loss”) measures how much you have gained or lost on a position as the market moves. It updates continuously and is the primary indicator of trade performance. It is also an important metric in the context of liquidations, which is why this section will briefly elaborate on the subject.
How to calculate PnL
After you open a long or short position, your PnL updates continuously as the market moves. PnL turns positive when price moves in your favor and negative when it moves against you. Concretely: your PnL is the amount you receive upon closing your position, if it is negative, it is taken out of the collateral of the position.
The generic formula’s to calculate a position’s PnL are as follows:
The notional size is equal to the position’s collateral multiplied with its leverage.
Example
The workings of the PnL definition described above can be illustrated with an example: A user opens a long with a notional size of $10.000 on XLM, a 10% price increase yields a $1000 gain, which means the PnL is now $1000. If the price then decreases with 15%, PnL goes to -$500. This means upon closing the position, the user receives a payout of the collateral minus $500,-.