In plain English
What Unrealized profit and loss means
If you buy or sell something and its price changes before you close the trade, the difference is unrealized profit or loss. It is sometimes called “paper” profit or loss because it exists on the account statement, but it has not been locked in by a closing transaction. In margin and CFD accounts, unrealized gains and losses can affect equity and margin calculations.
Why it matters
Unrealized profit and loss helps explain why account equity can move even when no trade has been closed. It is central to margin monitoring, risk limits, and negative balance protection rules that may reference open-position profits when calculating available funds.
Example
Simplified example: you buy one unit at 100 and the market rises to 108. Your unrealized profit is 8. If the market later falls to 95 before you close the position, the unrealized result shifts to a 5 loss. Only when you close the trade does the final result become realized.
Quick answers
Common questions
Is unrealized profit the same as account balance?+
No. Account balance usually reflects closed, realized results and cash movements, while unrealized profit and loss comes from open positions and can still change.
Can unrealized loss become realized automatically?+
Yes. If you close the position, the open gain or loss becomes realized. It may also be realized by liquidation or forced close-out in some accounts.
Sources