Foundations · Ch. 03
Long, Short and PnL
Two traders look at the exact same chart. One is praying it goes up, the other praying it goes down. Both can be right, just not at the same time. The whole difference is one word: long or short.
The Idea
Intuition
Every position is a bet on direction. Go long and you make money when the price rises and lose when it falls. Go short and it all flips: now you make money when the price drops. Shorting is just betting the other way.
Your profit or loss, your PnL, is beautifully simple. It’s your position size times how far the price moved, with the sign set by which side you took. Price up 5% on a long is +5% of your size. That same move on a short is −5%. One straight line, mirrored for the two sides.
That straight line is the whole game underneath perps. Once you can read this payoff, funding and liquidations are just adjustments to it. Flip the side in the panel and watch the line flip with you.
The Math
How It’s Calculated
In plain terms: PnL is your size times the percentage the price moved, positive for a long when price rises and for a short when it falls.
For a position of size (notional) opened at the entry price, with direction for long and for short:
It’s linear in the price and perfectly symmetric: whatever a long makes on a move, a short loses on the same move, and the other way around. Everything that comes later, funding and fees and liquidation, is just a term added to or taken off this line.