{"id":9452,"date":"2022-10-11T06:30:27","date_gmt":"2022-10-11T06:30:27","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9452"},"modified":"2022-10-11T06:30:27","modified_gmt":"2022-10-11T06:30:27","slug":"what-is-unrealized-p-l-and-floating-p-l","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/11\/what-is-unrealized-p-l-and-floating-p-l\/","title":{"rendered":"What is Unrealized P\/L and Floating P\/L?"},"content":{"rendered":"\n

In your trading platform, you will see something that says \u201cUnrealized P\/L\u201d or \u201cFloating P\/L\u201d with green<\/strong> or red<\/strong> numbers beside them.<\/p>\n\n\n\n

In this lesson, we explain what Unrealized P\/L and Floating P\/L are.<\/p>\n\n\n\n

When trading, there are actually two different types of \u201cprofit or loss<\/strong>\u201d, also known as \u201cP\/L<\/strong>\u201d.<\/p>\n\n\n\n

Both are important. Let\u2019s discuss the difference between the two.<\/p>\n\n\n\n

Unrealized P\/L<\/h2>\n\n\n\n

Unrealized P\/L<\/strong> refers to the profit or loss held in your current open positions\u2026.your currently active trades.<\/p>\n\n\n\n

This is equal to the profit or loss that would be \u201crealized\u201d if all your open positions were closed immediately<\/em>.<\/p>\n\n\n\n

Unrealized P\/L is also known as \u201cFloating P\/L<\/strong>\u201d because the value is constantly changing since your positions are still open.<\/p>\n\n\n\n

\"Floating<\/figure>\n\n\n\n

Your unrealized P\/L continuously fluctuates (or \u201cfloats\u201d) with the current market prices if you have open positions.<\/p>\n\n\n\n

For example, if you currently have an unrealized profit, if price move against you, the unrealized profit can become an unrealized loss.<\/p>\n\n\n\n

Example: Floating Loss<\/h3>\n\n\n\n

Let\u2019s say your account is in USD and you are currently\u00a0long<\/strong>\u00a010,000 units\u00a0EUR\/USD, which was bought at\u00a01.15000<\/strong>.<\/p>\n\n\n\n

The current exchange rate for EUR\/USD is 1.13000<\/strong>.<\/p>\n\n\n\n

Let\u2019s calculate the position\u2019s Floating P\/L:<\/p>\n\n\n\n

Floating P\/L = Position Size x (Current Price - Entry Price)\n\nFloating P\/L = 10,000 x (1.13000 - 1.15000) \n\n-200 = 10,000 x (- 0.0200)\n<\/pre>\n\n\n\n
The position is down<\/em> 200 pips<\/strong>.<\/p>\n\n\n\n
Since you\u2019re trading a mini lot, each pip is worth $1.<\/p>\n\n\n\n
So you currently have a Floating Loss of $200<\/strong> (200 pips x $1).<\/p>\n\n\n\n
\"Floating<\/a><\/figure>\n\n\n\n
It is a Floating Loss because you have NOT closed the trade yet.<\/p>\n\n\n\n
Usually, when a loss remains floating, you are hoping that the price will turn around.<\/p>\n\n\n\n
If EUR\/USD rose above your original entry price to 1.16000<\/strong>, then you would now have a Floating Profit.<\/p>\n\n\n\n
The position is now up 100 pips<\/strong>.<\/p>\n\n\n\n
Since you\u2019re trading a mini lot, each pip is worth $1.<\/p>\n\n\n\n
So you currently have a Floating Profit of $100<\/strong> (100 pips x $1).<\/p>\n\n\n\n
\"Floating<\/a><\/figure>\n\n\n\n
Realized P\/L<\/h2>\n\n\n\n
A Realized Profit<\/strong> is profit that comes from a completed trade.<\/p>\n\n\n\n
Same thing with a loss.<\/p>\n\n\n\n
A Realized Loss<\/strong> is a loss that comes from a completed trade.<\/p>\n\n\n\n
In other words, your profits or losses only become realized<\/em> when the positions are CLOSED.<\/p>\n\n\n\n
This is the only time when your account balance will change to reflect any gains or losses.<\/strong><\/p>\n\n\n\n
If you closed a position with profits, your account balance will increase<\/em>. If you closed with losses, then your account balance will decrease<\/em>.<\/p>\n\n\n\n
Example: Realized Loss<\/h3>\n\n\n\n
Let\u2019s say your account is in USD and you are currently long<\/strong> 10,000 units of EUR\/USD, which was bought at 1.15000.<\/strong><\/p>\n\n\n\n
The current exchange rate for EUR\/USD is 1.13000<\/strong>.<\/p>\n\n\n\n
Let\u2019s calculate the position\u2019s Floating P\/L:<\/p>\n\n\n\n
Floating P\/L = Position Size x (Current Price - Entry Price)\n\nFloating P\/L = 10,000 x (1.13000 - 1.15000) \n\n-200 = 10,000 x (- 0.0200)\n<\/pre>\n\n\n\n
The position is down<\/em> 200 pips<\/strong>.<\/p>\n\n\n\n
And since you\u2019re trading a mini lot, each pip is worth $1.<\/p>\n\n\n\n
\"Floating<\/a><\/figure>\n\n\n\n
So you currently have a Floating Loss of $200<\/strong> (200 pips x $1).<\/p>\n\n\n\n
It is a floating loss because you have NOT closed the trade yet.<\/p>\n\n\n\n
\"Realized<\/a><\/figure>\n\n\n\n
But you can\u2019t stomach losing anymore and decide to close the trade right then and there.You\u2019ve realized<\/em> the $200 loss<\/strong> and the cash is DEDUCTED<\/em> from your account balance<\/strong>.<\/p>\n\n\n\n
When you opened the trade, you had $1,000<\/strong> as your Balance.<\/p>\n\n\n\n
But after you closed the trade with a $200 loss<\/strong>, your Balance is now $800<\/strong>.<\/p>\n\n\n\n
<\/td>Balance<\/strong><\/td>Floating P\/L<\/strong><\/td><\/tr>
BEFORE<\/td>$1,000<\/td>-$200<\/strong><\/td><\/tr>
AFTER<\/td>$800<\/td>\u2013<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
Example: Realized Profit<\/h3>\n\n\n\n
Let\u2019s say your account is in USD and you are currently long<\/strong> 10,000 units of EUR\/USD, which was bought at 1.15000<\/strong><\/p>\n\n\n\n
The current exchange rate for EUR\/USD is 1.16000<\/strong>.<\/p>\n\n\n\n
Let\u2019s calculate the position\u2019s Floating P\/L:<\/p>\n\n\n\n
Floating P\/L = Position Size x (Current Price - Entry Price)\n\nFloating P\/L = 10,000 x (1.16000 - 1.15000) \n\n100 = 10,000 x (0.0100)\n<\/pre>\n\n\n\n
The position is up<\/em> 100 pips<\/strong>.<\/p>\n\n\n\n
And since you\u2019re trading a mini lot, each pip is worth $1.<\/p>\n\n\n\n
\"Floating<\/a><\/figure>\n\n\n\n
So you currently have a Floating Profit of $100<\/strong> (100 pips x $1).It is a floating profit because you have NOT closed the trade yet.<\/p>\n\n\n\n
You hear a voice out of nowhere to exit your trade.<\/p>\n\n\n\n
So you close the trade.<\/p>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n
You\u2019ve realized<\/em> the $100 gain<\/strong> and the cash is ADDED to your account balance.<\/strong><\/p>\n\n\n\n
When you opened the trade, you had $1,000<\/strong> as your Balance.<\/p>\n\n\n\n
But after you closed the trade with a $100 gain<\/strong>, your Balance is now $1,100.<\/strong><\/p>\n\n\n\n
<\/td>Balance<\/strong><\/td>Floating P\/L<\/strong><\/td><\/tr>
BEFORE<\/td>$1,000<\/td>+$100<\/strong><\/td><\/tr>
AFTER<\/td>$1,100<\/td>\u2013<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
Profit Isn\u2019t Real Until It\u2019s Realized<\/em><\/h2>\n\n\n\n
The difference between realized and unrealized profit is subtle, but it can mean the difference between a profitable trade or a losing trade.<\/p>\n\n\n\n
It is important for traders to clearly know how to differentiate between \u201crealized\u201d P\/L and \u201cunrealized\u201d P\/L<\/p>\n\n\n\n
  • Realized profits are gains that have been converted into cash and ADDED to your account balance<\/strong>.<\/li>
  • Realized losses are losses that have been converted into cash and DEDUCTED from your account balance<\/strong>.<\/li><\/ul>\n\n\n\n
    In other words, for you to realize profits from a trade you\u2019ve made, you must receive cash<\/strong> and not simply observe the value of your trade increase without exiting the trade.<\/p>\n\n\n\n
    Unrealized profit is theoretical profit<\/strong> or \u201cpaper profit\u201d that is currently available, but could be taken away at any moment<\/strong> if the price moves against the trade.<\/p>\n\n\n\n
    When it comes to love, think about \u201cthe one\u201d that got away.<\/p>\n\n\n\n
    At one point in your life, he or she was an \u201cunrealized\u201d spouse.<\/p>\n\n\n\n
    You never built up the courage to pop the question and now you\u2019re forever heartbroken with a \u201crealized\u201d loss of the perfect spouse.<\/p>\n\n\n\n
    This is exactly what happened to Bob.<\/p>\n\n\n\n
    To this day, Bob is still<\/em> single.<\/p>\n\n\n\n
    This depressing life lesson from Bob\u2019s sad love story can be applied to trading.<\/p>\n\n\n\n
    If you have not closed out of your position and \u201crealized\u201d your gain, you could still lose some, or all, of your profits.<\/p>\n\n\n\n
    <\/strong>Realized profit is real profit<\/strong> that can no longer be affected by price changes because it is no longer part of an active trade.<\/p>\n\n\n\n
    It is real money that is added to your Balance and can be withdrawn from your trading account and transferred into your bank account.<\/p>\n\n\n\n
    Recap<\/h2>\n\n\n\n
    In this lesson, we learned about the following:<\/p>\n\n\n\n
    • Unrealized P\/L<\/strong> or Floating P\/L<\/strong> refers to the profit or loss held in your current open positions\u2026.your currently active trades.<\/li>
    • Realized P\/L <\/strong>refers to profit or loss from a completed trade.<\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"
      In your trading platform, you will see something that says \u201cUnrealized P\/L\u201d or \u201cFloating P\/L\u201d with green or red numbers beside them. In this lesson, we explain what Unrealized P\/L and Floating P\/L are. When trading, there are actually two different types of \u201cprofit or loss\u201d, also known as \u201cP\/L\u201d. Both are important. Let\u2019s discuss the difference between the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[896],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9452"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9452"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9452\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9452"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9452"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9452"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}