Realized Profit

realized profit is money in hand
Realized profit is money in hand. PeopleImages.com

Definition:

Day traders like to talk about their profit, but there are actually two different types of profit, and the difference between them can be the difference between making or losing money.

Realized Profit

Realized profit is profit that comes from a completed trade (i.e. a trade that has been exited). Realized profit is usually already deposited into the trader's trading account, and can be withdrawn from their trading account to a bank account.

Realized profit is included in the account balance in trading account statements, and is often shown on trading software as a daily profit that is reset to zero at the beginning of each trading day (to keep track of each day's trading success).

Unrealized Profit

Unrealized profit is profit that comes from a currently active trade (i.e. a trade that has not yet been exited). Unrealized profit is profit that would be made if the trade was exited at that time. Unrealized profit will change with each price change, so it can be reduced to zero (or become an unrealized loss) at any time. Unrealized profit becomes realized profit at the moment that a trade is exited.

Only Realized Profit is Profit

When traders talk about their profit, they are referring to their realized profit. However, if they say something like "a trade is X ticks in profit", they are referring to unrealized profit from a trade that they are currently holding.

The difference between realized and unrealized profit may appear slight, but it can mean the difference between a profitable trade or a losing trade. Unrealized profit is theoretical profit that is currently available, but could be taken away again at any moment (i.e. if the price moves against the trade).

Realized profit is real profit that can no longer be affected by price changes, because it is no longer part of an active trade.

 

Also Known As: Realized P/L, Unrealized P/L