Realized profit and loss comes from closed positions. Unrealized profit and loss is the changing result on open positions. Prop traders must distinguish them because live equity can breach a loss threshold before a trade is closed, while different trailing-drawdown methods treat open profit differently.
Balance, equity and P&L
| Term | Plain-English meaning |
|---|---|
| Balance | Account value after closed results and posted charges |
| Unrealized P&L | Current gain or loss on open positions |
| Equity | Balance plus unrealized P&L, subject to platform adjustments |
| Realized P&L | Result locked in when a position closes |
| Available drawdown | Distance between the relevant account value and the loss floor |
Commission, exchange fees and other charges can make the platform result differ from a chart-only calculation.
Open loss can create a breach
Suppose an account has a $50,000 balance and a $48,500 maximum-loss floor.
- Closed balance: $50,000
- Open loss: −$1,300
- Live equity: $48,700
- Cushion above floor: $200
The trader has not closed the position, but only $200 remains if the firm measures live equity. Another adverse move, commission or slippage can reach the threshold.
Waiting for a stop at $48,400 would be too late in an equity-based rule.
Open profit and trailing drawdown
The effect of open profit depends on the drawdown method.
Intraday trailing
An intraday threshold may follow real-time equity highs. If an open trade reaches a large gain, the floor can rise even if much of that gain later disappears.
End-of-day trailing
An EOD threshold generally updates from a defined end-of-day balance or equity reference. An intraday open high may not move the next floor unless it is captured by the program’s closing calculation.
Static drawdown
A static floor stays tied to the starting reference. Open loss can still breach it, but profitable performance does not make the floor trail higher.
Never assume “trailing” has one universal formula. Read whether the rule references balance, equity, intraday highs or EOD values.
Daily-loss calculations
A daily-loss limit can include:
- Closed losses during the daily window.
- Floating losses on open positions.
- Commission and exchange fees.
- Prior-day open positions carried through the reset.
- The provider’s chosen balance or equity reference.
If the daily limit resets at a server time, an open trade can affect both sides of the reset. Record the provider’s time zone and dashboard threshold.
Worked example with costs
A trader begins the day with a $1,000 daily-loss allowance.
During the session:
- Realized loss: $450
- Unrealized loss: $400
- Commission and fees: $35
Total impact under an inclusive equity calculation:
$450 + $400 + $35 = $885
Remaining room:
$1,000 − $885 = $115
A new position risking $150 would exceed the remaining budget even though the closed loss is only $450.
Payouts change the cushion
A withdrawal reduces account balance. Depending on the program, the drawdown floor may stay where it is, stop trailing at a defined point or change according to a payout rule.
Before requesting:
- Record current balance.
- Record the active loss floor.
- Subtract the proposed withdrawal.
- Calculate the remaining cushion.
- Leave room for costs and open-position movement.
- Confirm any minimum-balance or buffer rule.
A payout amount and a safe payout amount are not always identical.
Position-sizing workflow
- Read the live drawdown threshold.
- Decide the maximum fraction of remaining cushion to risk.
- Convert the stop into contract dollars.
- Add commission and slippage.
- Include all correlated open positions.
- Reduce size if the planned loss approaches the daily or maximum floor.
- Recheck after every fill.
Use the smaller of the firm’s contract limit and the quantity supported by the risk budget.
Common mistakes
- Monitoring balance while the rule uses equity.
- Ignoring open losses because they are not closed.
- Letting open profit raise an intraday trailing floor, then allowing a full retracement.
- Forgetting commissions and exchange fees.
- Assuming an EOD rule cannot be breached intraday.
- Carrying positions through a reset without recalculating.
- Requesting a payout without measuring the remaining cushion.
Bottom line
Realized P&L explains what has been closed; unrealized P&L explains what is still moving. Prop-firm risk controls may use one or both. Watch live equity, the dashboard loss floor and the rule’s update method together.