A realized loss is a loss on a trade or position after it is closed. The value of any trade or position fluctuates with the market, so a trade must be completed and closed out before a loss is counted as realized.
The value of a position can swing between a loss and a gain many times before it is closed by the trader. Until the trade is settle, all the gains and losses are unrealized. These are called paper gains and losses because they only exist on paper (or, more accurately, on the screen). If the trade is closed when it is at a loss, then it becomes a realized loss.
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