realized/unrealized PnL with multiplier

External question — Quantitative Finance Stack Exchange Author: nimo23 Original post: https://quant.stackexchange.com/questions/53518 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Look at this trade: Sequence Side Quantity @ Price 1. Buy 1000 @ 1000 2. Sell 1000 @ 1250 The calculation of the realized PnL: version 1: realizedPnL = (1000-1250)*1000 = 25000$ But looking at other PnL-formulas, for example: https://www.bitmex.com/app/pnlGuide https://support.bitforex.com/hc/en-us/articles/360029616532-How-to-calculate-the-unrealized-and-realized-profits-and-loss-PNL- they use: version 2: realizedPnL = (1/1000-1/1250)*1000 = 0,2$ by the formula: Realized PNL = quantity * multiplier * (1 / Entry Price - 1 / Exit Price) or I do not understand the "1/x"-part and the "multiplier"-part : When and why should I take version 2 instead of version 1? Which version is correct? Has the "1/x" something to do with leverage? Or has the "multiplier" something to do with leverage? For example, if I trade Forex or CFD with a "leverage=1", then "contract multiplier=1". Or do I mix something up?

External answer — Quantitative Finance Stack Exchange Author: nimo23 Original post: https://quant.stackexchange.com/a/53519 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. There is no need to use the following confusing formula: PNL = quantity * multiplier * (1 / Entry Price - 1 / Exit Price) For all asset classes the following formula is sufficient: PNL = quantity * (ExitPrice - EntryPrice) The "multiplier" is only used when converting from one bucket (e.g. currency) to another. Looking at the following example: Sequence Side Quantity @ Price in $ 1. Buy 1 BTC @ 10000 2. Sell 1 BTC @ 11000 We have PnL = (11000-10000)*1 = +1000$ (profit) in percentage: PnL = (11000/10000) = +0,1% (profit) If I want to express the PnL in BTC instead of $, then I can do the following: PnL = 1/1+0,1 = +0,909BTC The " 1/x " is fixed and independent of any multiplier . 1 represents 100%. That ` s all.