In futures trading, understanding PnL accurately is essential for evaluating the true performance of each trade and improving your strategy. This guide explains four core concepts: Unrealized PnL, Realized PnL, ROI, and how trading fees affect your final returns.
Note: Echobit perpetual futures are USDT-margined linear contracts, and PnL is denominated in USDT. The formulas and examples below are based on USDT-margined contracts.
1. Unrealized PnL
Unrealized PnL refers to the floating profit or loss generated by price movements while a position is still open. It is only a paper gain or loss and changes in real time with market prices. It becomes actual profit or loss only after the position is closed.
To reduce the risk of abnormal liquidation caused by price manipulation, Echobit calculates Unrealized PnL using the Mark Price, not the Last Price.
Formula
- Long position:
Unrealized PnL = (Mark Price - Average Entry Price) × Position Size
- Short position:
Unrealized PnL = (Average Entry Price - Mark Price) × Position Size
Example
You open a long position of 0.1 BTC at 60,000 USDT. When the Mark Price rises to 63,000 USDT:
Unrealized PnL = (63,000 - 60,000) × 0.1 = +300 USDT
This means you currently have a floating profit of 300 USDT.
2. Realized PnL
Realized PnL refers to the profit or loss that is locked in after a position is actually closed. This is the part that truly affects your account balance. Unlike Unrealized PnL, it no longer changes with market prices.
To reflect the true net result of a trade, Realized PnL should include both trading fees and funding fees.
Formula
- Long position:
Realized PnL = (Average Exit Price - Average Entry Price) × Closed Quantity - Trading Fees ± Funding Fees
- Short position:
Realized PnL = (Average Entry Price - Average Exit Price) × Closed Quantity - Trading Fees ± Funding Fees
For Funding Fees, the actual amount paid or received during the holding period is included in the calculation:
- Funding paid = negative
- Funding received = positive
3. ROI
ROI, or Return on Investment, measures profit or loss relative to the margin you invested. It is a key indicator for evaluating the efficiency of a trade.
Formula
ROI = PnL ÷ Initial Margin × 100%
Where:
Initial Margin = Position Value ÷ Leverage
= (Average Entry Price × Quantity) ÷ Leverage
The amplifying effect of leverage
Because margin is only a portion of the total position value, leverage amplifies ROI. In an ideal case without fees:
ROI ≈ Price Change Percentage × Leverage Multiple
For example, if the price increases by 5%, then with 10x leverage, ROI is approximately 50%.
This means leverage amplifies both profits and losses, so please use high leverage with caution.
4. How Fees Affect Your Returns
Futures trading mainly involves two types of costs, both of which directly reduce your final returns.
4.1 Trading Fee
Trading fees are charged based on whether the order is executed as a Maker or a Taker. Fees apply both when opening and when closing a position.
Formula
Trading Fee = Position Value × Fee Rate
- Taker: Executes immediately against existing orders in the order book, such as a market order. The fee rate is usually higher.
- Maker: Adds liquidity to the order book, such as a limit order that is not filled immediately. The fee rate is usually lower.
- The higher your VIP level, the lower your fee rate is generally.
Echobit standard fee rates
- Maker: 0.02%
- Taker: 0.06%
Higher VIP levels may enjoy lower fees. Please refer to the actual rates displayed on the platform.
4.2 Funding Fee
Funding fees are unique to perpetual futures and are used to keep the contract price close to the spot index price. Funding is exchanged periodically between long and short positions. Echobit does not charge this fee itself. The settlement cycle may vary by token.
Formula
Funding Fee = Notional Position Value × Funding Rate
- If the funding rate is positive, longs pay shorts.
- If the funding rate is negative, shorts pay longs.
Leverage and fees
Trading fees are calculated based on the notional position value, not the leverage level itself. However, higher leverage means lower required initial margin, so the same amount of fees represents a larger percentage of your margin and therefore has a greater impact on ROI.
For this reason, high-leverage and high-frequency traders should pay close attention to fee costs. Using Maker orders can help reduce fees over time.
5. Full Example
Below is a complete example that ties all of the above concepts together.
Example assumptions
- Position: Long 0.1 BTC
- Entry Price: 60,000 USDT
- Leverage: 10x
- Position Value: 60,000 × 0.1 = 6,000 USDT
- Initial Margin: 6,000 ÷ 10 = 600 USDT
When the Mark Price rises to 63,000 USDT:
- Unrealized PnL = (63,000 - 60,000) × 0.1 = +300 USDT
- Unrealized ROI = 300 ÷ 600 = +50%
Now assume the position is closed at 63,000 USDT with a Taker fee rate of 0.06%, and during the holding period one funding payment is made at a funding rate of +0.01%.
Calculation
- Gross PnL = (63,000 - 60,000) × 0.1 = 300 USDT
- Opening Fee = 6,000 × 0.06% = 3.6 USDT
- Closing Fee = 6,300 × 0.06% = 3.78 USDT
- Funding Fee = 6,000 × 0.01% = 0.6 USDT paid by the long position
Final result
Realized PnL = 300 - 3.6 - 3.78 - 0.6 = +292.02 USDT
Actual ROI = 292.02 ÷ 600 = +48.67%
As you can see, trading fees and funding fees reduce the ROI from 50% to about 48.67%. The more frequently you trade and the higher the leverage you use, the more noticeable the effect of fees becomes.
Tips
- Unrealized PnL changes constantly, but Realized PnL is what actually counts. A floating profit is not a locked-in gain until the position is closed.
- Do not look only at the profit amount. Earning 300 USDT with 600 USDT of margin is very different from earning 300 USDT with 3,000 USDT of margin.
- Always include fees in your calculations. When evaluating whether a trade was worthwhile, remember to subtract both trading fees and funding fees.
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Use Maker orders when appropriate. Limit orders that add liquidity usually enjoy lower fees and can significantly reduce long-term trading costs.
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Risk Disclaimer
Cryptocurrency investments are subject to high market risk and price volatility. You should only invest in products that you are familiar with and fully understand the associated risks.
Before making any investment decisions, please carefully assess your investment experience, financial situation, investment objectives, and risk tolerance, and consider seeking advice from an independent financial advisor.
The information provided in this document is for informational purposes only and should not be considered financial, investment, or trading advice. Past performance is not indicative of future results. The value of your investments may fluctuate, and you may lose part or all of your invested capital.
You are solely responsible for your investment decisions. Echobit shall not be liable for any losses or damages arising from your investment activities.
