What is Unrealized P/L and Floating P/L in Forex Trading?

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.

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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.

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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.

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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

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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.

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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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