When discussing profits, there are two different types of profits from making trades. The easiest way to differentiate the two kinds of profits comes down to a simple question – are you making money or losing it?
A realized profit is monies that are generated from a completed trade, or one that has been completely exited, where the trader made money from the deal. Realized profit is typically deposited directly into the day trader’s trading account at the end of the day. It is actual funds that can be withdrawn or transferred to a bank account. Day traders will see all of their realized profits on the balance sheet of their trading account statement. Depending on the account, realized profits would be tracked as part of each day’s trading success.
In day trading futures, an unrealized profit is an equity held in a currently active trade, or a trade that is yet to be exited from the market. Any unrealized profit will only be made realized once the exit is complete and the trade is no longer in the market. As the price of the change continues to rise or fall while still actively participating in the market, the amount of unrealized profit will also change. It is possible that all unrealized day trading profits can be reduced to zero or taken as an unrealized loss, anytime during the process.
Whenever a day trader talks about their daily profit, they are usually only referring to the amount of money that has been “realized” in their account from closed or exited trades. Any other reference to profits in a trade typically refers to unrealized profit that is being currently held in a trade still active in the market. While the difference of determining actual realized profit from unrealized profit might seem minimal, it is not possible to lower unrealized profits once they become realized. Holding money in your account is different than equity realized in actual open trades.
One of the biggest significant advantages to becoming successful at day trading futures, over a long-term traditional investor, is the ability to close out all of their active accounts every day. By using an efficient day trading system, they can work the market while it is open and moving, never keeping their trades in an active state once the market closes.
Join us to see how we address realized and unrealized trading profits in our Open Access Trade Room. Register HERE.
TESTIMONIAL DISCLOSURE: Testimonials appearing on www.IndicatorWarehouse.com may not be representative of the experience of other clients or customers and is not a guarantee of future performance or success.
LIVE TRADE ROOM DISCLOSURE: All presentations, videos, and information are for educational purposes only and the opinions expressed are those of the presenter only. All trades presented should be considered hypothetical and should not be expected to be replicated in a live trading account.
Commodity Futures Trading Commission Futures and Options trading has substantial potential rewards, but also significant potential risk. You must be aware of the risks and be willing to accept them to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.
CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS, IN GENERAL, ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Use of any of this information is entirely at your own risk, for which Indicator Warehouse will not be liable. Neither we nor any third parties provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or suitability of the information and content found or offered in the material for any particular purpose. You acknowledge that such information and materials may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law. All information exists for nothing other than entertainment and general educational purposes. We are not registered trading advisors.