Realized profit in forex is the actual gain you record when you close a trade and lock in the result. While open positions show “paper” gains or losses that move with the market, realized profit is the cash (or account balance change) that appears after you exit a position. For traders this distinction matters: unrealized results tell you how positions are performing now, while realized profit is the figure you can use when measuring performance, paying taxes, or deciding how much capital you truly have available to trade.
Realized vs. unrealized: why the difference matters
When you open a forex trade, your position is marked to market. That mark-to-market number is the unrealized profit or loss — it will change every time the market ticks. If you leave the trade open, those gains or losses remain “on paper.” They only become realized when you close the position. Closing a profitable position increases your account balance by the realized profit; closing a losing position reduces it by the realized loss.
This is also important for margin. Unrealized losses can shrink your available margin and even trigger margin calls, but they don’t become a permanent reduction of your account until you close the trade (or until your broker force-closes it). Realized profit, by contrast, immediately changes your account equity and available funds.
How realized profit is calculated in forex
Calculating realized profit in forex is straightforward once you know three things: the entry price, the exit price, and the position size. A core unit used in forex calculations is the pip, which is the smallest standardized price movement for a pair (typically 0.0001 for many pairs, 0.01 for most JPY pairs).
A common formula traders use is:
P&L = Pip movement × Lot size × Pip value
For a long (buy) trade you take (Exit price − Entry price). For a short (sell) trade you use (Entry price − Exit price). That difference is converted into pips and multiplied by the lot size and pip value to give the profit or loss in the currency used by the pair.
Example 1 — EUR/USD standard lot
Imagine you buy 1 standard lot of EUR/USD (100,000 EUR) at 1.1000 and sell at 1.1010. The move is 10 pips. For a standard lot on EUR/USD, a one pip move is typically worth about $10. So:
Realized profit = 10 pips × 1 lot × $10/pip = $100
That $100 is credited to your account when the trade closes (less any fees).
Example 2 — USD/JPY mini lot
You sell 2 mini lots of USD/JPY (each mini lot = 10,000 USD) at 150.00 and close at 149.80. The move is 20 pips (JPY pairs usually are quoted to two decimal places, so one pip = 0.01). If one pip for a mini lot in USD/JPY is worth about ¥100, then:
Realized profit = 20 pips × 2 lots × ¥100/pip = ¥4,000
If your account is in USD you would convert that ¥4,000 into USD at the prevailing USD/JPY rate to see the realized profit in your base currency.
Because pip value depends on the currency pair and your account currency, many traders use calculators or the trading platform’s built‑in P&L display to avoid mistakes. Brokers routinely show realized profit in your account currency after a trade is closed.
When realized profit may be denominated in a different currency
Forex P&L is naturally expressed in the quote currency of the pair. For example, P&L from EUR/USD trades is typically in USD. If your trading account uses a different base currency, the broker will convert realized profit into your account currency at current rates. That conversion step matters when you want to tally realized profits across many trades or across different pairs — the exchange rate at the moment of conversion affects the net result.
Leverage, position size and the effect on realized profit
Leverage lets you control larger positions with a smaller deposit, which increases both potential realized profits and potential realized losses. The calculation of realized profit itself does not change with leverage — it’s still the difference between entry and exit multiplied by position size — but because leverage increases position size relative to the cash you put up, a given market move produces a larger effect on your account balance.
For example, a 1% favorable move on a leveraged position might equal a 50% gain on the margin you posted. That magnification is why traders monitor realized and unrealized outcomes closely and use risk controls like stop-losses and position-sizing rules.
Practical factors that affect your realized profit
Realized profit is not only about price movement. Trading costs and execution details alter the net outcome.
Spreads: When you open a trade you often pay the spread (the difference between bid and ask). A wider spread increases the price move required to be profitable and reduces realized profit.
Commissions: Some brokers charge explicit per‑lot commissions; subtract these from gross profit to get net realized profit.
Swap/rollover: If you hold positions past the rollover time, an overnight financing charge or credit (swap) can affect realized profit when you close.
Slippage: The actual execution price when you close a position can differ from the price you aimed for, especially during fast markets or low liquidity, which changes realized profit.
Partial closes and scaling: If you close part of a position, you realize profit proportionally. Keeping careful records lets you track realized profit by trade slice.
Broker policies: Netting, hedging rules, FIFO (first in, first out), and how the broker pairs opposing trades can change how realized profit is recorded in accounts that use different matching conventions.
Examples woven together
Suppose you open a 0.5 lot long position in EUR/USD at 1.1200 and close at 1.1255. The move is 55 pips. If a standard lot pip is $10, then pip value for 0.5 lot is $5. Gross realized profit = 55 × $5 = $275. If your broker charged a $7 round‑trip commission and you held overnight and paid a $2 swap, your net realized profit = $275 − $7 − $2 = $266. That net amount is what appears in your account balance when the trade closes.
Now imagine you traded USD/CHF and the profit was denominated in CHF. If you then convert the CHF profit into USD for reporting, the conversion rate at the time of conversion determines the final figure in USD. This illustrates why traders with multi‑currency trades can see realized profit fluctuate slightly when expressed in a single reporting currency.
Accounting and tax basics (general guidance)
From an accounting or tax perspective in many jurisdictions, realized profits are the relevant numbers because they represent actual gains that can be recognized as income. Unrealized profits typically remain off the income statement until realized. Tax rules and reporting requirements vary widely by country and by whether you are trading as an individual or business. Traders should keep accurate trade records, including dates, sizes, entry and exit prices, and any fees, and consult a tax professional for advice specific to their circumstances. This is educational information, not tax advice.
Common mistakes traders make when tracking realized profit
One frequent error is treating unrealized “paper” gains as available capital — closing the position is the only way to make those gains real. Another mistake is neglecting transaction costs; small fees can accumulate and materially lower net realized profit over time. Some traders forget to convert profits from quote currencies into their account currency consistently, which leads to confusion when tallying results. Overuse of leverage without understanding margin implications can turn small market moves into large realized losses. Finally, poor record-keeping makes it hard to measure real performance and to learn from past trades.
Risks and caveats
Trading forex involves significant risk. Leveraged positions amplify both profits and losses; a small adverse move in the market can produce a large realized loss that may exceed your initial deposit. Execution risks such as slippage, latency, and gaps at news events can change realized outcomes unexpectedly. Brokers have different policies on how realized profits are calculated and converted; read platform rules and account terms. Past realized profit does not guarantee future results. This content is educational and not personalized trading advice — if you are unsure how realized profit affects your trading plan, tax situation, or risk tolerance, consult a qualified financial professional.
Key Takeaways
- Realized profit is the actual gain or loss you record when you close a forex position; unrealized profit is a paper result that changes while the trade is open.
- Calculate realized profit by multiplying the pip movement by lot size and pip value, then subtract spreads, commissions, swaps and any conversion effects to find net profit.
- Leverage increases the size of realized gains and losses relative to your capital; careful position sizing and risk controls are essential.
- Keep accurate trade records and remember realized profit, not unrealized gains, is what affects your account balance and typically what matters for tax/reporting.
References
- https://www.soft-fx.com/blog/how-to-calculate-your-profit-and-loss-for-your-trading-positions/
- https://b2broker.com/news/how-to-calculate-profit-and-loss-for-your-trading-positions/
- https://corporatefinanceinstitute.com/resources/accounting/foreign-exchange-gain-loss/
- https://www.poems.com.sg/glossary/investment/realised-profit-loss/
- https://www.investopedia.com/articles/forex/12/calculating-profits-and-losses-of-forex-trades.asp
- https://arongroups.co/forex-articles/how-to-calculate-profit-and-loss-in-forex/
- https://www.drivetrain.ai/post/foreign-exchange-fx-gains-losses-in-financial-statements