An Equity Drawdown

An equity drawdown is a temporary reduction in the value of an investment caused by the price of that investment going in the wrong direction (creating an unrealized loss) before moving in the right direction, and thus allowing the investor to take (to realize) an acceptable profit for the risk taken.

Unrealized Gain or Loss:

An unrealized gain or loss is a momentary appraisal of an open position that has been marked-to-market using the last trading price and is subject to change when the next trading price hits the tape (the public record).

Realized Gain or Loss:

A realized gain or loss is a permanent accounting record for tax purposes.

An open position occurs when an investor or trader executes a buy order in a brokerage account to go long a tradable security or a sell order to go short that security. While that position is open, it is subject to unrealized Profit and Loss (P&L). That open position is closed by executing the opposite trade (i.e., a long is closed by selling the shares initially purchased to open that position, and a short is closed by buying-to-cover the position opened by borrowing shares from your broker and then sold to the market). Once the position is closed, the resulting P&L is realized and cannot be changed. Your broker will book the result and report it to you and the IRS at the end of year.