Floating P&L
Floating P&L — unrealized profit and loss — is what your open positions are worth at current prices. It changes with every tick and becomes permanent only when a position closes.
It is computed from entry versus current price, scaled by position size: long one lot of EURUSD from 1.0900 with price at 1.0885 is 15 pips against, a floating loss of $150. Add floating P&L to balance and you get equity.
When the position closes, the floating amount converts to realized P&L and the balance moves. Until then it is provisional — but not invisible: margin calculations and most account rules read equity, which includes it.
In a prop-firm challenge
Because most firms apply their rules to equity, floating losses count in real time. If the daily loss limit is $500 and an open trade floats to −$500, the account can be breached at that moment, even if price would have recovered an hour later. At some firms a trailing drawdown also ratchets up with floating profit peaks, so an unbooked winner can raise the level your equity must stay above. Both behaviors reward closing or reducing positions before they test a limit, and both are detailed in drawdown types explained.