Understanding how your profits and losses are calculated in futures trading is crucial for effective risk management. Your net P&L is derived from three primary components: trading fees, funding fees, and your position's closing profit or loss. This guide breaks down each element in detail.
Trading Fees
Trading fees are incurred every time you open or close a position. They are calculated based on whether you act as a maker (providing liquidity) or a taker (removing liquidity).
- Taker Fee: Applied when you execute an order that immediately matches an existing order on the order book. The fee is calculated as
Position Value x Taker Fee Rate (e.g., 0.02%). - Maker Fee: Applied when you place an order that rests on the order book, providing liquidity for others to trade against. The fee is typically lower, often
Position Value x Maker Fee Rate (e.g., 0.00%).
Funding Fees
Perpetual contracts use a mechanism called funding fees to keep the contract's market price aligned with the underlying spot index price. These fees are exchanged between traders with opposing positions (long vs. short) at regular intervals, usually every 8 hours.
Whether you pay or receive funding fees depends on your position direction and the current funding rate:
- If the funding rate is positive, long position holders pay funding fees to short position holders.
- If the funding rate is negative, short position holders pay funding fees to long position holders.
The funding fee is calculated as: Funding Rate * Position Value. The position value is typically Number of Contracts * Contract Face Value * Mark Price at the time of funding settlement.
Calculating Profit and Loss
Your overall profitability is a combination of unrealized and realized P&L.
Unrealized P&L (Floating P&L)
This refers to the current profit or loss on your open positions, calculated against the current mark price.
For USDT-Margined (Linear) Contracts:
- Long Position:
(Mark Price - Entry Price) * Position Size - Short Position:
(Entry Price - Mark Price) * Position Size
For Coin-Margined (Inverse) Contracts:
- Long Position:
(1 / Entry Price - 1 / Mark Price) * Position Size - Short Position:
(1 / Mark Price - 1 / Entry Price) * Position Size
Realized P&L (Closed P&L)
This is the actual profit or loss you lock in when you close a position.
For USDT-Margined (Linear) Contracts:
- Long Position:
(Exit Price - Entry Price) * Position Size - Short Position:
(Entry Price - Exit Price) * Position Size
For Coin-Margined (Inverse) Contracts:
- Long Position:
(1 / Entry Price - 1 / Exit Price) * Position Size - Short Position:
(1 / Exit Price - 1 / Entry Price) * Position Size
A Practical Example
Let's walk through a complete example to see how all these elements come together.
A trader acts as a taker and buys (goes long) 0.1 BTC of a BTC/USDT perpetual contract with an entry price of 50,000 USDT. They use 500 USDT as margin with 10x leverage.
Assumptions:
- Taker Fee: 0.02%
- Maker Fee: 0.00%
- Funding Rate at next interval: -0.025%
Step 1: Opening the Position
- Opening Trade Fee (Taker):
50,000 * 0.1 * 0.02% = 1 USDT
Step 2: Funding Fee Event
- Since the funding rate is negative and the trader is long, they receive funding fees.
- Funding Fee Received:
50,000 * 0.1 * (-0.025%) = 1.25 USDT
Step 3: Closing the Position
- The trader later closes the entire 0.1 BTC position as a maker at an exit price of 60,000 USDT.
- Realized P&L from Trade:
(60,000 - 50,000) * 0.1 = 1,000 USDT - Closing Trade Fee (Maker):
60,000 * 0.1 * 0.00% = 0 USDT
Step 4: Calculating Total Realized P&L
Now, we sum all the components to find the total profit:Realized Trade P&L + Funding Fee - Opening Fee - Closing Fee1,000 USDT + 1.25 USDT - 1 USDT - 0 USDT = 1,000.25 USDT
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It's good practice to regularly review your trade history, which provides a detailed breakdown of every fee, funding payment, and the P&L for each order. This helps you understand the true cost and performance of your trades.
Frequently Asked Questions
What is the difference between maker and taker fees?
Maker fees are charged for orders that provide liquidity to the market, while taker fees are for orders that remove liquidity. Exchanges typically offer lower or zero maker fees to incentivize traders to add depth to their order books.
How often are funding fees paid?
Funding fees for perpetual contracts are most commonly exchanged every 8 hours. However, this interval can vary depending on the specific exchange and contract, so always check the trading rules for the instrument you are using.
Why did I pay a funding fee on a losing trade?
Funding fees are separate from your trade's P&L. They are a mechanism for balancing the market and are determined by the funding rate and your position direction, not whether your trade is currently profitable. You can receive funding fees on a losing trade and pay them on a winning trade.
Is realized P&L the final amount I get?
Yes, realized P&L represents the actual profit or loss that has been credited or debited from your account balance after a position is closed, accounting for all fees and funding.
How can I see a full breakdown of my P&L?
All reputable exchanges provide a detailed "Trade History" or "Order History" section. This will list every execution, along with the exact fees incurred and any funding payments made or received for your positions.
What's the main difference between linear and inverse contract P&L calculations?
Linear contracts (USDT-margined) calculate P&L in the quote currency (e.g., USDT), which is straightforward. Inverse contracts (coin-margined) calculate P&L in the base currency (e.g., BTC), which requires using the inverse of the price in the formula.
Conclusion
Mastering the calculations behind trading fees, funding fees, and profit/loss is a fundamental skill for any futures trader. It allows for precise risk assessment and helps you understand the true cost of your trading strategies. Always trade rationally, use the data from your historical trades to learn and improve, and never risk more than you can afford to lose.