What it is — Balance vs Equity
Your balance is your account value from closed trades only. Your equity is balance plus or minus all open, unrealized P/L — what the account is truly worth this second.
Equity is the number that matters while trades are open: free margin = equity − used margin, and the broker's margin-level math (equity ÷ used margin) runs entirely on equity.
Why it matters — Balance vs Equity
- It's your real risk exposure: judging account health by balance while positions bleed is how margin calls surprise people.
- Stop-outs trigger on equity, not balance — watch it during floating drawdowns.
- Honest journaling: record equity at day-end; balance-only records hide open-risk disasters in progress.
Equity in real time
Equity is the account’s honest net worth this second: balance plus everything currently floating. The standing example, both directions: $1,000 balance, 0.04 lots of EURUSD floating −12 pips → equity $995.20. The same position +30 pips → equity $1,012.00. Close the trade and the floating amount parks itself permanently in the balance. Equity is also the number behind every protective mechanism you have: margin level = equity ÷ used margin (the margin-call countdown runs on equity, not balance), and stop-outs fire when equity falls through the broker’s line.
Is equity real money?
It is the truest mark-to-market value of the account — the number a buyer would pay this instant — but it is not yet banked: it converts to balance only when positions close, and between now and then it is exposed. This duality is where trading psychology lives. Floating profits feel spendable and float away precisely when spent mentally; floating losses feel imaginary and become permanent exactly when you refuse to look. The professionals’ habit is to treat equity as the only account size: position sizes are computed on current equity (so risk % tracks reality, not last month’s balance), drawdown is measured from the equity peak, and the journal records both numbers — the 1% journal format keeps the columns for it. Decisions on equity; stories on balance.
Frequently asked questions — Balance vs Equity
Why is my equity lower than my balance?
Open positions are currently underwater by the difference. It recovers (or stops out) with price — that gap IS your floating loss.
What is the difference between equity and free margin?
Equity is the whole account value including floating P/L; free margin is what remains of it after the margin locked by open positions — the buffer a losing trade can consume before a margin call.
Is equity real money?
It is the true current value of the account — what everything is worth if closed now — but not yet banked. It becomes balance (realized money) only when the floating positions are closed.
Can equity be higher than balance?
Yes — when open positions are in profit. Many traders still count it as unrealized until closed; profits aren't spent until then.