What Is Floating P&L?
Floating P&L (also called unrealized or open P&L) is the current profit or loss on positions that are still open. It changes with every price tick. A position entered at $100 with current price at $110 shows $10 floating profit. This profit exists on paper but hasn't been realized — it can evaporate if price reverses before you close.
How Floating P&L Works
Floating P&L creates psychological pressure: the natural instinct is to close profitable positions quickly (to "lock in" gains) and hold losing positions (hoping for recovery). This tendency, described by Prospect Theory, leads to the worst possible behavior — cutting winners short and letting losers run. Awareness of this bias is the first step to overcoming it.
Why It Matters for Traders
Manage floating P&L through rules rather than emotions: predetermined profit targets and trailing stops handle winners, predetermined stop-losses handle losers. Never make reactive decisions based on the dollar amount of floating P&L. Instead, evaluate whether the trade thesis is still intact — if yes, hold according to your plan regardless of the P&L number.
