The actual profit or loss locked in when a position is closed. Realized P/L is added to or deducted from your account balance.
What Is Realized P/L?
Realized P/L is the profit or loss that is finalized when you close a trade. Once a position is closed, the gain or loss is deducted from or added to your Account Balance. If you bought EUR/USD at 1.0850, held through price fluctuations, and closed at 1.0900, your realized profit is 50 Pips regardless of what the price did in between.
Realized P/L Calculation
For a long trade: Realized P/L = (Close Price - Open Price) x Contract Size. For a short trade: Realized P/L = (Open Price - Close Price) x Contract Size. Remember that buy orders open at the Ask Price and close at the Bid Price, and the result may need conversion to your account currency. Our Profit/Loss Calculator handles all of this automatically.
Realized P/L and Taxes
Realized P/L is what tax authorities typically use to calculate your taxable gains. Floating P/L on positions that remain open at year-end may or may not be taxable depending on your jurisdiction and the tax treatment of forex gains in your country. Keep records of all realized trades for tax purposes.
Related Terms
Floating P/L
The unrealized profit or loss on open positions based on current market prices. Floating P/L changes with every price tick until the position is closed.
Account Balance
The total amount of money in your trading account from deposits, withdrawals, and realized (closed) trades. Does not include floating profit or loss.
Drawdown
The decline in an account's value from its peak to its lowest point before recovering. Drawdown is measured as a percentage and is one of the most important metrics for evaluating trading performance.
Settlement
The process of completing a trade by exchanging the currencies involved. Spot forex settles on a T+2 basis (two business days after the trade date).
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