What Is the Difference Between Unrealized and Realized P&L? What Happens After a Position Is Closed?
Unrealized P&L Is the Changing Result of an Open Position
Beginners often notice that the profit-and-loss figure in a trading account keeps changing. When price moves favourably, the account may show a profit. If price reverses, that profit may shrink or even become a loss.
As long as the position remains open, this is generally described as unrealized profit or loss.
Unrealized P&L estimates the current result of an open position using the prevailing market price. If a trader opens a long gold position and gold rises, the position may show an unrealized profit. If gold falls below the entry price, it may show an unrealized loss.
The important word is “unrealized.” The result has not yet been fixed. As long as the position remains open, the figure can increase, decrease or reverse.
A profitable position therefore does not automatically mean that the same amount of profit has already been secured. The decision to end a profitable trade is explored in When Should a Profitable Trade End? Three Approaches to Taking Profit.
Realized P&L Is the Result After the Trade Has Ended
When a position is closed, its changing unrealized result becomes a realized trading result.
Suppose a long gold position is showing an unrealized profit. If the trader closes the position, the difference between the entry price and the actual closing price becomes part of the final realized result.
After the position has been closed, later movements in the gold price no longer change that completed trade.
If the closing price produces a loss instead, the previous unrealized loss becomes a realized loss.
Closing the Position Removes Its Market Exposure
The most direct consequence of closing a position is that the associated exposure to future price movements disappears.
While a long gold position remains open, every movement in gold can continue to change the unrealized P&L.
Once the position is fully closed, subsequent gold-price movements no longer create new gains or losses for that completed trade.
Used Margin Is Normally Released When the Position Closes
If the product uses margin, opening a position generally commits part of the account's funds to support the exposure.
When that position is closed, the margin associated with it will normally be released and reflected again in the calculation of available funds. Exact terminology and calculations depend on the product and platform.
Closing a position can therefore change several account variables at the same time: exposure ends, unrealized P&L stops changing, a realized result is established and the funds committed to that position are released.
The Account Then Reflects the Completed Trading Result
Unrealized P&L describes the current condition of an open trade. Realized P&L describes what remains after the trade has actually ended.
A profitable close confirms a realized gain, while closing a losing position confirms the loss.
This is why “How much profit is showing now?” is not necessarily the same question as “How much did this trade finally make?”
Why Can the Final Result Differ From the Profit Shown on Screen?
The final outcome may also be affected by spreads, applicable fees, holding-related costs and execution differences.
For example, an unrealized profit of USD100 shown on screen does not necessarily mean that an immediate close will produce exactly USD100 of realized profit.
The trade must still be executed at a price available in the market. During fast conditions or reduced liquidity, the final execution price can differ from the quotation seen immediately before the order was sent.
The trade-offs between execution speed and price control are explained in What Is the Difference Between Market, Limit and Stop Orders?.
Slippage Can Change the Realized Result
Slippage occurs when the actual execution price differs from the price expected when the order is submitted.
If the market moves between the decision to close and the actual execution, the realized result may be slightly better or worse than the number shown beforehand.
For more context, see What Is the Difference Between Slippage and a Price Gap?.
More Frequent Trading Also Makes Costs More Important
Every time a position is opened and closed, spreads, potential slippage and other applicable costs can accumulate.
Each amount may appear small in isolation, but frequent trading can make these costs increasingly important to realized performance.
This is one reason why the number of correct directional calls alone does not determine long-term results. See Why Can Frequent Trading Make Losses More Likely?.
To Know How Much a Trade Made, First Ask Whether It Has Ended
The core distinction between unrealized and realized P&L is whether the position has been closed.
Unrealized P&L is a temporary result calculated while market exposure remains active. Realized P&L is the result established after the transaction is completed.
Understanding this difference helps prevent a common mistake: treating a profit shown on screen as if it were already locked in.
As long as a position remains open, both profit and loss can continue to change. Once the position closes, the completed trade is no longer affected by future price movements.