When trading forex, understanding profit and loss (P/L) is crucial to managing risk effectively. In your trading platform, you will often see “Unrealized P/L” or “Floating P/L”, marked with either green (profit) or red (loss) numbers.
But what do these terms really mean? Let’s break them down so you can avoid trading mistakes and maximize your profits.
Understanding the Two Types of Forex Profit and Loss
There are two different types of profits and losses in forex trading:
1️⃣ Unrealized P/L (Floating P/L) – Profit or loss from currently open positions. This value fluctuates as the market price changes.
2️⃣ Realized P/L – Profit or loss that becomes final when a trade is closed.
Both are important metrics that every forex trader must understand to manage risk effectively.
What is Unrealized P/L (Floating P/L)?
📌 Unrealized P/L, also called Floating P/L, refers to the profit or loss from your currently open trades.
📌 This value constantly changes as the market price moves.
📌 Your account balance remains unchanged until the position is closed.
👉 If the market moves in your favor, the floating profit increases.
👉 If the market moves against you, the floating loss increases.
💡 Example: Floating Loss
- You buy 10,000 units of EUR/USD at 1.1500.
- The current price drops to 1.1300.
- You are down 200 pips (since 1 pip = $1 in a mini lot).
- Your Floating Loss = -$200 (200 pips × $1).
At this stage, the loss is not realized yet since the trade is still open.
💡 Example: Floating Profit
- You buy 10,000 units of EUR/USD at 1.1500.
- The current price rises to 1.1600.
- You are up 100 pips (since 1 pip = $1 in a mini lot).
- Your Floating Profit = +$100 (100 pips × $1).
This profit is not locked in until the trade is closed.
What is Realized P/L?
📌 Realized P/L is the actual profit or loss that is locked in when a trade is closed.
📌 The moment you close a position, the profit/loss is added or deducted from your account balance.
💡 Example: Realized Loss
- You bought 10,000 units of EUR/USD at 1.1500.
- The price drops to 1.1300.
- Your Floating Loss was -200 pips ($200 loss).
- You decide to close the trade.
- The $200 loss is now deducted from your account balance.
📌 Before: Account balance = $1,000 | Floating P/L = -200 pips (-$200)
📌 After closing trade: Account balance = $800
💡 Example: Realized Profit
- You bought 10,000 units of EUR/USD at 1.1500.
- The price rises to 1.1600.
- Your Floating Profit was 100 pips ($100 gain).
- You decide to close the trade.
- The $100 profit is now added to your account balance.
📌 Before: Account balance = $1,000 | Floating P/L = +100 pips (+$100)
📌 After closing trade: Account balance = $1,100
Why Realized Profit is More Important than Unrealized Profit
✅ Realized Profit is actual money you can withdraw.
❌ Unrealized Profit can disappear if the market moves against you before you close the trade.
📢 Trading Tip: Never count your profits before closing the trade! Market conditions can change in seconds.
👉 Many traders have missed profits because they waited too long to exit a winning trade.
Key Takeaways
✔ Unrealized P/L (Floating P/L) refers to profit or loss from currently open trades, which fluctuates as the market price changes.
✔ Realized P/L is the actual profit or loss after closing a trade, which affects your account balance.
✔ Profits aren’t real until they are realized – a winning trade can quickly turn into a loss.
✔ Always monitor your trades and use stop-loss and take-profit orders to secure gains.
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