Performance (PnL)
Measurement of gains or losses made over a given period by a strategy or an investment.
Beginner-friendly explanation
Performance or PnL (Profit and Loss) indicates how much you've gained or lost after your trades. It can be positive (gain) or negative (loss). Example: You buy €100 worth of Bitcoin then sell it at €120. Your performance is a €20 profit.
Intermediate-level insight
Performance (PnL) accurately measures the profitability of a portfolio or strategy. It can be expressed in absolute terms or percentages. Regular monitoring allows for strategic adjustments if needed. Example: Your €5,000 portfolio is now worth €5,500. Your overall performance is a gain of €500, or +10%.
Advanced perspective
Advanced PnL calculation considers multiple indicators such as annualized return, portfolio volatility (standard deviation of returns), Sharpe ratio (risk-adjusted returns), and maximum drawdown (max observed loss). These indicators allow a comprehensive and deep evaluation of an investment strategy’s quality. Example: An algorithmic strategy achieves a gross annual performance of 30%, but with a high Sharpe ratio (above 2), indicating excellent risk management relative to the achieved returns.
Trading Basics
performance, PnL, return, profit, loss, Sharpe ratio, risk-adjusted return, volatility, drawdown