Balance plus what's open now:equity is the truer vow.
The current value of your trading account, including unrealised profits and losses on open positions.
Equity = Account Balance + Unrealised P&L.
In plain words
In a trading account, equity is what the account would be worth if every open position were closed now. It is the balance, which changes only when a trade is closed or money is paid in or out, plus the running profit or minus the running loss on open positions.
See it move
Balance: the largest here
Why it matters
Margin calculations use equity, not balance: free margin and margin level are both worked out from it. An account with a healthy balance can have low equity if its open positions are losing.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
An account has a balance of 5,000 and one open position showing an unrealised loss of 800 (invented figures).
- 1Equity = balance + unrealised profit or loss
- 2= 5,000 + (−800)
- 3= 4,200
The balance still reads 5,000, but the account is worth 4,200 at this moment.
A common mistake
Equity and balance are often used as if they were the same. They are equal only when nothing is open; while a position is running, equity moves with every change in price and the balance does not.
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Educational information, not investment advice or a recommendation to trade.