P&L (Profit and Loss) represents the financial result of trading or investment activities, measuring the difference between revenues and costs over specific periods. P&L calculations include realized gains/losses from closed positions and unrealized gains/losses from open positions. Accurate P&L tracking is essential for performance measurement and risk management.

P&L analysis helps assess trading strategy effectiveness, identify profitable patterns, and make informed decisions about position management. Different P&L calculations include gross P&L (before costs) and net P&L (after commissions, fees, and other expenses). Understanding P&L dynamics helps optimize trading performance and risk management.

Real-world example: A trader’s daily P&L shows +$15,000 from a profitable EUR/USD trade and -$8,000 from an unsuccessful oil position, resulting in +$7,000 net daily P&L before accounting for commissions and other trading costs.