Open P&L vs. Day P&L: What Should You Focus On?

Investors used to rely on data derived from profit and loss (P&L) to track their investments' performance. These metrics are still widely used today, although specific strategies have shifted significantly.

The primary difference between open and day P&L is the period over which they are calculated. Let’s take a look at both metrics and explore why they are important.

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What Is Open P&L?

Open P&L measures the amount of money gained or lost from the beginning of the trade or the moment you opened the position.

As the market price of your position changes, so does your open P&L. It can shift dramatically in a single day, let alone over weeks or months.

How Do You Calculate It?

To calculate open P&L, use the following:

For example, if you opened a brand new position for $3, then the value of $3 is your opening price. You will then compute the succeeding days' potential profits and/or losses depending on any increase or decrease in your instrument's price since your opening trade.

What Is Open P&L Best Used For?

Open P&L provides a quick glimpse into the value of your open portfolio positions so you can assess if these trades are increasing or decreasing in value.

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What Is Day P&L?

Day P&L refers to money made or lost on a position from the previous night's closing price. This also includes any intraday profit and loss.

This metric computes potential profit and loss on a daily basis, allowing traders a granular look into their investments.

How Do You Calculate It?

To calculate Day P&L:

If the price of your instrument increases to $3.50 from $3 after one day, your Day P&L is $0.50, which multiplies with your total position size.

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What Is Day P&L Best Used For?

Day P&L quantifies your net gain or loss over one trading day, which is crucial for short-term traders.

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Open P&L vs. Day P&L: An Example

A trader opens a new BUY position in a volume of 100 shares at a price of $3. The next day, the price increased to $3.50. How would you calculate open and day P&L?

Calculating Day P&L

To calculate the day P&L, subtract the current price from the previous day's closing price and multiply it by the number of shares:

Calculating Open P&L

For Open P&L, subtract the current price from the opening price, which will yield the same result:

Should You Focus on Open P&L or Day P&L?

The difference between open and day P&L becomes more prominent the longer the position remains open. Day P&L measures the differences over a single day, while open P&L shows how much the price of an instrument has gained or lost in the long term. It's essential to look at both metrics to get a complete picture of your position's worth.

Some investors focus solely on open P&L because it provides a bird’s eye view of the position’s value. However, the importance of either metric depends entirely on your approach to trading. Whichever you decide to focus on, it’s worth keeping an eye on the other, as they can serve as valuable guides when making future investment decisions.

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