Profit and Loss, often abbreviated, represents the net financial result of trading activities. It quantifies the difference between the total revenue generated from closed positions and the total expenses incurred, including commissions, fees, and slippage. For instance, if a trader buys a stock for $10 and sells it for $12, less $0.50 in commission, the profit would be $1.50. Conversely, if the stock was sold for $9, the loss would be $1.50, accounting for the commission.
Understanding the financial outcome of trades is fundamental to assessing trading strategy effectiveness and overall portfolio performance. Tracking these figures allows for identifying strengths and weaknesses in a trading approach, ultimately informing necessary adjustments for improved profitability. Historically, calculating this metric was a manual process, but modern trading platforms automate this calculation, providing real-time insights into account performance.
