Forex trading, also known as foreign exchange trading, is an investment strategy that involves the buying and selling of currencies to make a profit. It is the largest financial market in the world, with an estimated daily turnover of $5.3 trillion. Forex trading is accessible to anyone with an internet connection and a trading account, making it a popular choice for both amateur and professional investors.
One of the most important concepts in Forex trading is profit, which is the difference between the price at which a currency is bought and the price at which it is sold. However, there are two types of profit that traders need to be aware of: unrealized profit and FPL (floating profit or loss).
Unrealized profit is the profit that a trader would make if they were to close their position at the current market price. For example, if a trader buys EUR/USD at 1.1200 and the current market price is 1.1300, they have an unrealized profit of 100 pips (the difference between the two prices). This profit is unrealized because the trader has not yet closed their position and realized the profit.
On the other hand, FPL (floating profit or loss) is the profit or loss that a trader has on an open position that has not yet been closed. For example, if a trader buys EUR/USD at 1.1200 and the current market price is 1.1300, they have an FPL of 100 pips. However, if the market price drops to 1.1250, their FPL will decrease to 50 pips.
It is important to note that FPL is not the same as realized profit or loss, which is the profit or loss that a trader has on a closed position. For example, if a trader buys EUR/USD at 1.1200 and sells it at 1.1300, they have a realized profit of 100 pips. However, if they hold onto the position and the market price drops to 1.1150, their realized profit will decrease to 50 pips.
Unrealized profit and FPL are important concepts for Forex traders because they can affect their trading decisions. Traders may choose to close their position and realize their profit when they have a significant unrealized profit, or they may choose to hold onto their position and wait for the market price to increase further. Similarly, traders may choose to close their position and limit their loss when they have a significant FPL, or they may choose to hold onto their position and hope that the market price will recover.
In conclusion, Forex trading is a complex investment strategy that involves buying and selling currencies to make a profit. Traders need to be aware of the concepts of unrealized profit and FPL, which are the profit or loss that they have on an open position that has not yet been closed. These concepts can affect their trading decisions and ultimately determine their success in the Forex market.
