Understanding unrealized profit — often called “floating” or “paper” profit — is one of the first practical skills a forex trader needs. It tells you how much you would gain or lose if you closed an open position at current market prices, but it isn’t cash until the trade is closed. This article explains what unrealized profit means in forex, how platforms calculate it, how it affects your account and margin, and what to watch for when managing open trades. Trading carries risk; the information here is educational and not personalised trading advice.
What unrealized profit means
Unrealized profit is the difference between the price you opened a trade at and the current market price, multiplied by the position size. If you bought a currency pair and its price rises, the gain while the position remains open is an unrealized profit. If the price falls, the open position shows an unrealized loss. Because the market moves continuously, unrealized profit “floats” — it can grow, shrink or turn negative at any moment until you close the trade and lock in a realized result.
This is why traders see two figures on their platform: an account Balance (which only changes when trades are closed) and Equity (which equals Balance plus unrealized P/L). Equity is the number that reflects the current value of your account if all positions were closed immediately.
How unrealized profit is calculated in forex
Calculating unrealized profit in forex usually follows a simple structure: determine the pip movement between your entry price and the current price, multiply by the number of pips’ value for your lot size, and convert to your account currency if necessary.
For most major pairs quoted with four decimal places, one pip equals 0.0001. For JPY pairs it is usually 0.01. Lot sizes determine the pip value: a standard lot is 100,000 units of base currency, a mini lot is 10,000 and a micro lot is 1,000. If your account is in the quote currency or in USD for common pairs, pip-value math is straightforward; otherwise you’ll need a conversion step.
For example, imagine you go long 1 mini lot (10,000 units) of EUR/USD at 1.1500 and the price moves to 1.1600. The trade gained 100 pips. For a mini lot each pip is worth roughly $1, so the unrealized profit is 100 pips × $1 = $100. If you instead traded one standard lot, the same 100‑pip move would equate to about $1,000.
When the pair or your account currency differs, the platform usually converts unrealized profit into your account currency automatically. Be aware that the quoted pip value can vary slightly by broker and pair.
Platform quirks and how brokers show unrealized P/L
Trading platforms display unrealized P/L in different ways, and the calculation can use different price points. A common convention is to use the bid price for long positions and the ask price for short positions when calculating floating P/L, because those are the prices at which you can close the positions. Some platforms offer an option to use the last traded price instead. These small differences affect the displayed number, but not the true outcome when a real order executes.
Unrealized P/L impacts several account items immediately. Equity moves with floating profit or loss, and equity is the figure that determines free margin and margin level. A growing unrealized loss reduces free margin and can trigger margin calls or automatic position liquidations according to your broker’s rules. Conversely, an unrealized gain increases equity and frees margin, but it remains subject to market reversal until you close the position.
Practical examples
Consider two short examples that illustrate the calculations and the effect on account equity.
Example 1 — EUR/USD mini lot:
You buy 10,000 EUR at 1.1500 (mini lot). The market moves to 1.1600. That is a 100‑pip increase. At $1 per pip for a mini lot, the unrealized profit is $100. If your account Balance was $2,000 before opening the trade, your Equity while the trade is open is $2,100 (Balance + unrealized profit).
Example 2 — USD/JPY and account conversion:
You are long 1 standard lot (100,000 USD) of USD/JPY at 150.00 and your account currency is EUR. The price moves to 150.50, which is a 50‑pip gain (remember JPY pairs typically use 0.01 pips). A standard lot pip value in USD/JPY for a standard lot is roughly ¥1,000 per pip, so 50 pips ≈ ¥50,000. The platform will convert ¥50,000 into euros at the current USD/JPY and EUR/JPY cross rates to show unrealized profit in your account currency. Brokers do this conversion automatically; manual conversion requires care to use the correct cross rates.
How unrealized profit affects risk and margin
Unrealized profit is tightly connected to margin management. Your used margin is set when you open positions; unrealized P/L changes equity and therefore free margin. If an unrealized loss becomes large enough that equity falls below your broker’s margin requirement, you may receive a margin call or see positions closed automatically (stop‑out). Because leverage magnifies both gains and losses, a relatively small adverse move can turn a healthy unrealized gain into a realized loss if you don’t manage the position.
Another important effect is psychological: traders can be tempted to hold onto unrealized profits in hopes of more gain, or cut winners too early. Good trade management separates the theoretical value of floating profit from the decision of when to lock it in.
Ways traders commonly manage unrealized profits
Traders use several techniques to protect or secure unrealized profits while leaving room for further favorable movement. These include moving stop‑loss orders to breakeven or to trailing stops, scaling out by closing part of a position, or taking profits at predefined levels. Hedging by opening an offsetting position is also used in some strategies to preserve gains, though this carries its own costs and complexities. Which method to use depends on your trading plan, risk tolerance and the rules of your broker. This is educational information, not a recommendation.
Risks and caveats
Unrealized profit is not guaranteed income. It can disappear in an instant when the market moves. Several practical caveats affect the accuracy of the floating profit you see: brokers may compute P/L using bid/ask differently, displayed prices can lag or be delayed on certain feeds, spreads widen during news or low liquidity which affects the price at which you could actually close, and slippage can lead to a different realized price than displayed. Swap or rollover charges applied at daily intervals can also change your P/L over time. Finally, leverage amplifies both gains and losses and can lead to rapid account drawdowns and margin calls. Always understand your broker’s margin rules, trade execution policy and how P/L is presented on their platform. Trading involves risk and is not suitable for everyone.
Key Takeaways
- Unrealized profit (floating P/L) is the gain or loss on open forex positions and becomes realized only when a trade is closed.
- Calculate it by multiplying pip movement by pip value for your lot size and converting to account currency when needed; platforms typically do this automatically.
- Unrealized P/L affects equity and free margin, so it directly influences margin calls and stop‑out risk.
- Treat unrealized profits as provisional: market conditions, spreads, swap charges and slippage can change final outcomes.
References
- https://www.poems.com.sg/glossary/investment/unrealised-profit-loss/
- https://www.interactivebrokers.com/campus/glossary-terms/unrealized-pl/
- https://www.ifcci.org.my/courses/learn-forex-course-01/lessons/what-is-unrealized-p-l-and-floating-p-l/?course=8471
- https://www.soft-fx.com/blog/how-to-calculate-your-profit-and-loss-for-your-trading-positions/
- https://dastrader.com/docs/calculating-unrealized-profit-and-loss-pnl/
- https://www.babypips.com/learn/forex/what-is-unrealized-profit-or-loss
- https://help.etoro.com/en-us/s/article/what-s-the-difference-between-realized-and-unrealized-gains-US