Risk & Money ManagementNet Asset ValueAccount Equity
Equity
The live value of a trading account: balance plus the floating profit or loss of every open position.
What Equity means
Equity is defined as Balance plus Floating Profit and Loss. When no positions are open the two figures are identical; the moment a trade is placed, equity begins moving with the market while balance stays fixed until something is closed. Most platforms also fold accrued swap and any commission already charged into the calculation, so the displayed equity is intended to approximate what the account would be worth if every position were liquidated at current prices right now.
Equity is the number that actually governs an account's survival, because both free margin and margin level are derived from it rather than from balance. A trader can therefore hold a healthy balance and still be liquidated if floating losses have eroded equity far enough. One technical caveat is worth knowing: floating values are marked at the price at which a position would close, meaning the bid for a long and the ask for a short, so equity carries the spread as an embedded cost from the moment of entry.
Worked example
An account with a 10,000 dollar balance and open positions showing a 350 dollar floating loss has equity of 9,650 dollars. Against 3,617 dollars of used margin that gives a margin level of about 267 percent.
Related terms
- Account BalanceThe cash value of an account reflecting only completed transactions, before open positions are marked to market.
- Floating P<he unrealised profit or loss on open positions, marked to the current market price and changing with every tick.
- Free MarginThe portion of equity not tied up as collateral, available to open new positions or absorb losses on existing ones.
- Margin LevelEquity divided by used margin, shown as a percentage; the ratio brokers monitor to decide margin calls and stop outs.
- Used MarginThe total collateral currently locked across all open positions and pending margined orders.
Frequently asked questions
What does Equity mean in forex trading?
The live value of a trading account: balance plus the floating profit or loss of every open position.
How does Equity work in practice?
Equity is the number that actually governs an account's survival, because both free margin and margin level are derived from it rather than from balance. A trader can therefore hold a healthy balance and still be liquidated if floating losses have eroded equity far enough. One technical caveat is worth knowing: floating values are marked at the price at which a position would close, meaning the bid for a long and the ask for a short, so equity carries the spread as an embedded cost from the moment of entry.
What is an example of Equity?
An account with a 10,000 dollar balance and open positions showing a 350 dollar floating loss has equity of 9,650 dollars. Against 3,617 dollars of used margin that gives a margin level of about 267 percent.
Trade with a regulated broker
Understanding the terminology is the cheap part. The expensive part is choosing a counterparty whose execution, financing and withdrawal behaviour match what the marketing implies. Every broker below has been reviewed with a funded live account, and each review states which legal entity and which regulator applies to the account you would actually open.
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