Realized profit and loss
Family III · Risk
Not to be confused with floating profit and loss, unrealized profit and loss, average win loss ratio.
Realized profit and loss is the amount actually gained or lost once a position is closed, so it is fixed and no longer changes with the market. It is calculated from the difference between the entry price and the exit price, adjusted for commissions, fees and any other transaction costs. Until a position is closed, any gain or loss remains floating.
How realized P&L is calculated
For a long position, realized profit and loss equals the exit price minus the entry price, multiplied by the position size, minus costs. For a short position, the order is reversed: entry price minus exit price, multiplied by size, minus costs. Costs include broker commissions, exchange fees, financing charges and, where applicable, taxes. The exact cost structure varies by broker, instrument and jurisdiction.
Worked example
A trader buys 100 shares at 50.00 and later sells them at 53.50. The broker charges a commission of 0.05 per share on each side.
Realized versus unrealized
Realized profit and loss appears in the account balance and is available for withdrawal or reinvestment, subject to settlement and any restrictions. Unrealized profit and loss, also called floating profit and loss, exists only on open positions and can change or disappear before the position is closed. A common distinction is that realized P&L is final for a completed trade, while unrealized P&L is provisional.
Often confused with
- floating profit and loss
- Floating profit and loss is the same as unrealized P&L: it exists only while a position is open and changes with every price tick, whereas realized P&L is fixed after closing; the visible sign is whether the position still appears in the open positions list.
- unrealized profit and loss
- Unrealized profit and loss is the theoretical gain or loss on an open position, not yet confirmed by a closing trade, while realized P&L has been locked in by an exit; the visible sign is whether the figure appears in the account balance as settled cash.
- average win loss ratio
- The average win loss ratio is a performance statistic that divides the mean profit of winning trades by the mean loss of losing trades over a chosen period, expressing how much the typical winner earns relative to the typical loser.