Reading profit-and-loss posts: returns, amounts and realized gains

The first thing that catches the eye in a profit-and-loss post is often a large percentage. Yet the meaning of the same +50% changes with how much was invested, when, and whether the position was actually sold. A few additional details help you interpret another person's experience more accurately.

Terms to distinguish

• Profit or loss amount: The gain or loss expressed as money.
• Return: Profit or loss as a proportion of a reference amount.
• Unrealized profit or loss: A calculation using the current valuation of assets still held.
• Realized profit or loss: Gains or losses fixed by closing a trade, such as through a sale. Services differ in how they include costs.
• Average purchase price: An average of multiple purchases, weighted by quantity or the relevant basis.

The same +50% can represent different amounts

Ignoring fees, buying an asset for ₩100,000 and selling it for ₩150,000 gives a ₩50,000 profit and a 50% return. Investing ₩10,000 at the same return gives a ₩5,000 profit. Percentages alone cannot compare the size of gains or losses.

Derivatives screens may calculate returns against margin, making them difficult to compare directly with spot-price changes or whole-account returns. If leverage is involved, liquidation risk and costs also matter.

A higher account balance is not always profit

A balance growing from ₩1 million to ₩1.5 million is not a 50% return if you deposited another ₩500,000 during the period. Similarly, a lower balance after a withdrawal need not mean a loss. Performance over a period with repeated deposits and withdrawals depends on the calculation method.

Check whether trading, funding and currency-conversion costs are included, and whether the whole position could actually sell at the displayed price. A single successful trade and the outcome for the entire period are also different things.

Useful details to include in a post

• The period and the asset or product type.
• Whether gains are unrealized or realized.
• The amount used as the return's basis and whether costs are included.
• Whether the result covers selected trades or the whole account.

Hide unnecessary personal information in images, including emails, account numbers and order identifiers. Someone else's gains are not guaranteed to repeat for you. The amounts in this article are hypothetical examples explaining the calculation.

References

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