It is crucial for traders to understand how to calculate profit and loss before opening a trade. The following will help you better understand the relationship between different variables and the PnL calculation.
Average position price
The average position price is the average cost of the current position opened. When a new transaction increases the position amount, the average position price will change accordingly.
Average position price = (Original Position Amount * Original Average Position Price + Latest Trade Amount * Latest Trade average price) / (Original Position Amount + Latest Trade Amount )
A has a long position in the 1 BTC denomination of the futures perpetual contract BTC-Perp with an average entry price of $18,000. Later, a new 1 BTC call option contract is bought at an entry price of $20,000. At this point, the average price of the position = (1 *18,000 + 1 *20,000) / (1 + 1) = $19,000
Profit and Loss (PnL)
Profit and Loss (PnL) refers to the unrealized or realized gains and losses of current positions.
For open positions：
PnL = (Mark Price - Average Position Price) * Position Size * Position Direction
（displayed in the position information）
For closed positions：
PnL = (Mark Price - Average Closing Price) * Position Size * Position Direction
（displayed in the trade records）
The position direction for long positions is +1, and for short positions is -1.
A has a long position in a 1 BTC denomination futures perpetual contract BTC-Perp with an average entry price of $18,000.
The contract is now marked at $19,000.
If A is in a position, A's unrealized PnL at this point = (19,000 - 18,000) x 1 x (+1) = $1,000.
If A closes all positions at $18,500, the PnL on the trade = (18,500 - 18,000) x 1 x (+1) = $500
Return on Investment
Return on Investment (ROI) is the ratio of profit/loss to the cost of the current position.
ROI = (Mark Price - Average Position Price) / Average Position Price * Position Direction * Leverage * 100%
The leverage multiplier for permanent positions is the leverage you actually set.
An existing long position 1 BTC futures perpetual contract BTC-Perp, entry average price of $ 18,000, position leverage of 5x, now the contract mark price of $ 19,000, at this time A's ROI = (19,000 - 18,000)/18,000 × (+1) × 5 × 100% = 27.78%.
Estimated Liquidation Price
When the maintenance margin ratio (MM%) of an account reaches 100%, the system will trigger a liquidation.
Note that if a trader holds multiple positions in their account, the estimated liquidation prices between positions will affect each other. The estimated liquidation price is for reference only and is not the standard for triggering a forced liquidation.
For long positions, the estimated liquidation price = (remaining margin - position size * current mark price - position gradient margin - (total maintenance margin - current position maintenance margin)) / (position size * (liquidation fee rate - 1)).
For short positions, the estimated liquidation price = (remaining margin + position size * current mark price - position gradient margin - (total maintenance margin - current position maintenance margin)) / (position size * (liquidation fee rate + 1)).