What Is Unrealized PnL? Paper Profits vs Real Money Explained
Think about checking a stock portfolio app. The number on the screen updates constantly — up $200, down $150, up $400. But until you actually hit the sell button, none of that is real money in your pocket. That fluctuating number is your unrealized PnL.
In perpetual futures, the same principle applies. Unrealized PnL is the profit or loss on a position you currently have open. It moves with the market price in real time. The moment you close the position, it becomes realized PnL — locked in, done, added to or subtracted from your actual balance.
Understanding Unrealized PnL
Unrealized PnL (sometimes called floating PnL or open PnL) shows you what you would make or lose if you closed right now.
It is calculated using the mark price — a fair price derived from multiple sources, not just the last trade. This prevents a single large trade from temporarily spiking your PnL.
For a long position: Unrealized PnL = (Mark Price − Entry Price) × Position Size
For a short position: Unrealized PnL = (Entry Price − Mark Price) × Position Size
The number updates every few seconds as the mark price moves. It is not in your balance yet.
What Is Realized PnL?
Realized PnL is what you actually walked away with after closing a position. Once realized, the amount is permanently added to or subtracted from your account balance.
Realized PnL includes everything:
- The price movement profit or loss
- Funding rate payments made or received while the position was open
- Trading fees paid on entry and exit
So your realized PnL is almost always slightly less than your unrealized PnL because of these costs.
Unrealized vs Realized: A Quick Comparison
| Unrealized PnL | Realized PnL | |
|---|---|---|
| When | While position is open | After position closes |
| In your balance? | No — just displayed | Yes — permanently settled |
| Can it change? | Yes, constantly | No — locked in |
| Includes fees? | Not yet | Yes |
How It Looks in Practice
Say you go long on BTC at $60,000 with a $5,000 position.
| BTC Price | Unrealized PnL | What It Means |
|---|---|---|
| $60,000 | $0 | Just entered |
| $62,000 | +$167 | Profitable, but not real yet |
| $59,000 | -$83 | Paper loss — you haven't lost anything until you close |
| $63,000 | +$250 | Close here and this becomes realized |
If you close at $63,000, your realized PnL would be roughly +$250 minus fees and any funding paid during the hold.
Why Unrealized PnL Can Mislead You
This is where a lot of traders go wrong. Seeing +$800 unrealized on a position feels great — it feels like you already made $800. But the market can take it back just as fast.
A few things to watch out for:
Counting profits too early. An open profit is not a closed profit. The market does not care what your PnL says. Until you close, that money is still at risk.
Ignoring funding costs eating into open gains. If you hold a position for days and the funding rate is working against you, your unrealized PnL overstates your actual take-home amount. A position showing +$100 unrealized might realize at +$60 after several funding intervals.
Letting winners become losers. Many traders hold open profits too long hoping for more, only to watch the position reverse. A take-profit order converts unrealized gains into realized ones automatically.
Practical Tips
- Set a take-profit (TP) at your target price so gains are locked in automatically without you needing to watch the screen.
- Use a stop-loss (TL) to cap how far negative your unrealized PnL can swing before the position closes.
- Subtract estimated funding costs from your unrealized PnL to see your realistic take-home if you close now. The displayed number does not account for funding owed.
- Do not size up based on unrealized profits. Using open gains as mental collateral for a bigger next trade is one of the most common ways traders give back everything they earned.
Related Terms
- PnL (Profit and Loss) — the full picture of how PnL is calculated including fees
- Mark Price — the price used to calculate your unrealized PnL in real time
- Funding Rate — the ongoing cost or income that eats into open position PnL
- Take Profit (TP) — how to convert unrealized gains into realized ones automatically
- Stop Loss (TL) — caps how negative your unrealized PnL gets before the trade closes