Unrealised profit and loss

The result an open position would produce if it were closed at the current quotation. It is calculated by marking the position to market: the difference between the opening price and the price available to close it, multiplied by the contract size and the number of lots, converted into the account currency. Nothing has settled, so the balance does not move. The figure changes with the price and is written to the balance only at the moment the position closes, at which point it becomes realised.

Which price is used is the detail that surprises people. A long position is valued at the bid, because the bid is where it could be sold, and a short position is valued at the ask. A position is therefore opened on one side of the spread and valued on the other, so it shows a debit the instant it exists, equal to the spread on its size, before the market has moved at all. Providers also differ on presentation: some show the figure gross and list commission and financing in their own columns, others net those charges into the same number, and the two conventions produce different figures for an identical position.

The consequential point is that unrealised does not mean inconsequential. Equity is the balance plus this figure, free margin and the margin level are both computed from equity, and a close out is measured against equity rather than against the balance. Losses on a position are calculated on the full contract value and are not limited to the amount deposited, so an unrealised loss can bring an account to its stop out level and close positions although not one of them was ever realised by choice. Favourable moves are measured on the same basis and to the same degree. Practitioners disagree about whether unrealised gains should count as capital for sizing a further position, and that disagreement is the substance of the argument about adding to winning positions.