What Is Realized and Unrealized P&L in Futures Trading?

Realized P&L and unrealized P&L are two of the most-mixed terms in retail futures trading, and the confusion costs more than it looks. A trader who reads the account balance after a flat-close session and a trader who reads it mid-position are looking at two different numbers built from two different rules. The futures account adds one further wrinkle that an equity account does not have: the unrealized line is settled to cash every day, not when the position closes. This post explains what each number measures, how futures change the framing, and how to log both so they can be separated cleanly in a trade record.

By Imperial Analytics

What realized and unrealized P&L are

A futures position has exactly two states: open or closed. While the position is open, there is no exit price yet, so the only way to put a dollar number on the position is to pretend the current market price is the exit price and run the calculation against it. That hypothetical result is the unrealized P&L, sometimes called open trade equity or open position value. The moment the position is closed, the hypothetical exit becomes a real exit, the number stops changing, and the result moves out of the unrealized bucket and into the realized bucket.

The two buckets answer two different questions. Realized P&L answers what has already been settled. Unrealized P&L answers what would settle if the trader closed right now. A trader who treats the second number as if it were the first is, in effect, banking results that have not happened yet.

How daily mark-to-market changes the framing in futures

This is where the futures framing diverges from the equity framing. In an equity account, an open position carries unrealized gains or losses on paper until the trader closes it, and the cash settlement happens once, on the close. In a futures account, the cash settlement happens every single day the position is open. The exchange calculates the difference between today's settlement price and yesterday's settlement price (or the entry price for a position opened today), multiplies by the contract multiplier and the number of contracts, and moves that amount of cash between the long and short sides through the clearing system.

Two consequences follow that matter for journaling and for prop firm rules. First, the unrealized P&L number on an open futures position is the cumulative undisbursed change since the last daily settlement, not since the entry price. Second, the cash already moved through the account is real money in the realized sense, even though the position is still open. The account balance line and the open trade equity line are connected by yesterday's settlement, not by the entry price.

A worked example makes the mechanics concrete. A trader buys one MES at 5,200.00 on a Tuesday morning. By Tuesday's settlement, the contract settles at 5,210.00. The exchange marks the position to market and pays the trader the ten-point gain at five dollars per point per contract, or $50, into the cash balance. The position is still open. On Wednesday morning, the cost basis for the position is 5,210.00, the settlement price from yesterday, not 5,200.00 from the entry ticket. If the trader closes Wednesday at 5,215.00, the additional five points are added to realized P&L for the new session. Across the trade, the trader collected ten points on Tuesday in cash and five points on Wednesday at exit, for fifteen points total. The total is the same as a single round-turn from 5,200.00 to 5,215.00 would have produced in an equity-style account, but the cash arrived in two installments.

Why prop firm drawdown rules watch both lines, not one

A drawdown rule that names "account equity" or "intraday equity" is almost always computed as realized P&L for the session plus current unrealized P&L on any open position. The drawdown line is anchored to that combined number, not to the realized number alone. This is consistent across most retail futures prop programs and is the reason a position that is offside but not yet stopped can quietly walk the live equity number into a rule breach while the realized P&L for the session still looks fine.

The same logic applies to a trailing drawdown that ratchets up with new equity highs. The highest combined equity touched during the session is what the trail follows, and a brief favorable excursion on an open trade can lift the trailing line even if the trader never closed at that price. A trader who is reading only the realized P&L tab on the platform and ignoring the open trade equity line is reading a different number than the one the rule is enforcing against.

What journaling each one separately reveals

Realized P&L is the only number that ends up in the brokerage statement, and for tax purposes that is the only number that matters. For trading behavior, the realized line on its own is missing the most informative measurements of the trade. Two trades can have the same closed-trade result through very different paths. One can run to plus four R-multiples, give back three, and close at plus one R-multiple. Another can open, drift slowly to plus one R-multiple, and close there with almost no adverse excursion. Both rows in the realized P&L tab read plus one R-multiple. The trade that gave back three R-multiples is the trade that contains the behavioral signal.

The fix is to capture the high-water and low-water marks on the open trade equity for each trade in the journal, in addition to the closed-trade result. The high-water mark is the maximum favorable excursion. The low-water mark is the maximum adverse excursion. Together with the entry, the exit, and the time stamps, those four numbers describe the trade as a path through unrealized P&L space and not just as a single closed-trade outcome. The realized P&L tells the trader what the account collected. The two excursion numbers tell the trader what the market offered.

How to log both lines in your own trade record

The minimum row for a futures trade journal that respects the realized and unrealized distinction is seven fields. Entry price, exit price, contract count, and direction make up the closed-trade row that the broker statement already produces. Maximum favorable excursion and maximum adverse excursion turn the row into a path. Daily settlement price for any session the position spanned turns a multi-day trade into a chain of daily marks that reconciles cleanly to the cash flows in the account.

The same seven fields support per-trade tags that pay off over time. A tag on direction lets the trader separate longs from shorts. A tag on session bucket lets the trader separate regular-trading-hours fills from extended-session fills. A tag on the kind of exit (clean stop, trailed stop, manual at target, manual at loss) lets the trader compare the realized result against the maximum favorable excursion and ask how much of the offered move each exit style is capturing on average. None of those questions can be answered without the excursion numbers, and the excursion numbers come from the unrealized P&L path, not from the realized line.

Twenty trades inside any tag is the floor below which the comparison between groups is not meaningful, per Imperial's sample-size standard. Below that count, a per-tag difference is a hypothesis, not a measurement.

Frequently asked questions

Frequently asked questions

• q: Is unrealized P&L real money? a: In a futures account, the daily change in unrealized P&L is settled to cash through daily mark-to-market, so a portion of what looks like unrealized is in fact already in the cash balance. In an equity account, unrealized P&L stays on paper until the position closes. In both cases, the unrealized number itself, as displayed mid-position, is a hypothetical exit price assumption and can change every tick.
• q: Why does my account balance change overnight even though I did not trade? a: Because the open futures position was marked to market at the exchange settlement price, and the daily change in value was paid into or debited from the cash balance. The position is still open the next session, but the cost basis the exchange uses to compute the next day's mark is yesterday's settlement, not the original entry price.
• q: Does the daily mark-to-market change the total profit or loss on the trade? a: No. The total profit or loss across the life of the trade is the same as it would be with a single end-of-trade settlement. The mark-to-market changes the timing of when cash moves, not the eventual total. The trader receives or pays the running daily differences instead of one lump sum at exit.
• q: Should I close a position at session end to lock in realized P&L? a: That is a position-management decision, not an accounting one. Closing flat at session end converts open trade equity into realized P&L and removes the next session's mark-to-market exposure. Holding the position keeps the position exposed to the next session but, because of daily settlement, the cash from any favorable move already in the position has already settled. The choice belongs to the strategy, not to the desire to see a higher realized line.
• q: How should a prop firm drawdown rule be read against these two numbers? a: As though the rule enforces against the combined live number. Most rules track realized P&L for the session plus current unrealized P&L on any open position, and the trailing drawdown line follows the highest combined equity touched during the session. The realized line on its own is not the line the rule is watching.

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