Open P&L meaning (Profit And Loss) – Trading Explained
What do you think of open P&L?
Forex trading offers a challenging and profitable opportunity for well-educated investors. Nevertheless, it is also a risky market. Importantly, traders must always remain alert to their open positions – measured in terms of the open profits and losses (P&L) on their trades.
It is vital for traders to have a clear understanding of their open P&L, as P&L can change throughout the day. However, do you know what is the open P&L and what is its purpose? Let’s find out!
Open P&L Meaning
To make a long story short, it represents the profit or loss amount of your open position(s) that you have not closed yet, at the current market price.
As the market price of your position transforms (e.g., stock, forex, or cryptocurrency), your open P&L will change. We need to mention that your open P&L can change significantly throughout the day.
If you closed all of your positions, in spite of whether you made a profit on your positions or not, your open P&L would become 0.
What is the purpose of open P&L?
It gives you a quick overview of the value of your current open positions in your portfolio. You have the opportunity to find out what is going on with your current positions, whether you are making money or not.
Nevertheless, it can be somewhat misleading because as long as the trade is open, it will change.
You need to keep in mind that only when you close a trade you will know how much money you made or lost.
To sum up, the open P&L meaning refers to the profits or losses incurred from your open positions at their current market prices, reflecting a positive or negative figure under the column.
It is worth noting that that open P&L isn’t an actual representation of your true profit or loss until you close those positions in order to realize it.
So, it is better not to regularly look at the figure as they can change throughout the duration of your open positions.
Forex trading strategies
Let’s focus on the forex trading strategies.
There are a variety of ways to trade forex. So, it is vital to select an approach that is compatible with your experience level and goals.
We need to mention the news trading strategy when it comes to the most effective forex trading strategies.
It is a well-known fact that global economic events influence forex. Without exaggeration, it is crucial to understand the influence of global economic events on currency pairs.
The list of major (scheduled) news events includes:
- Inflation rates
- Economic reports on national unemployment rates
- Interest rate decisions
- Consumer and business confidence surveys, etc.
Traders don’t focus only on one or two events. They examine the relationship between various events in tandem with current market conditions.
It is desirable to remember that forex, like any other global trade market, can be influenced by unscheduled, singular events. For example, political changes. Nonetheless, unscheduled events aren’t reliable indicators to utilize in a news trading strategy.
Traders who use the above-mentioned strategy rely on economic calendars as well as indexes in order to anticipate when a change will occur and in what direction the price will move.
With this in mind, news traders will look for price action to consolidate, which typically signals that a breakout is inevitable.
Day trading and trend trading
We can now focus on day trading as we have already discussed the news trading strategy.
Day traders utilize various short-term trading strategies. For example, some day traders trade the news (using economic calendars and indexes.) Interestingly, they change their focus based on global economic events. What about other day traders?
Others may be scalpers who trade the same asset day over day. It is worth noting that they utilize technical analysis in order to analyze intraday price movements.
We need to note that day trading isn’t the best option for all types of traders. It typically requires more experience and familiarity with the market.
In order to be successful, day traders must also practice effective money management. Moreover, day traders must be ready to respond swiftly if the price moves against them.
We can’t forget about trend trading. It is one of the most reliable and simple forex trading strategies.
As the name of the strategy suggests, it involves trading in the direction of the current price trend. In order to do so effectively, traders must first locate the overarching trend direction, duration, as well as strength.
In the case of the above-mentioned strategy, the trader doesn’t need to know the exact direction or timing of the reversal. Traders simply need to know when to exit their current position in order to lock in profits and minimize losses.
In order to determine the direction as well as strength of the current trend, traders often rely on simple moving averages and exponential moving averages such as average directional index (ADX) and moving average convergence/divergence (MACD.)
Last but not least, you should be prepared for the worst-case scenario. It is vital to understand all risk factors. Besides, all strategies have their advantages and disadvantages. So, you need to take into account various factors when it comes to forex trading strategies.