Glossary
Equity
Your account balance adjusted for the live profit or loss of all open positions.
Equity, explained
Equity is the real-time value of your account: your closed balance plus or minus the unrealised profit or loss of every open trade. When all positions are closed, equity equals balance.
Equity is the number that matters for survival, because it drives free margin and the margin/stop-out levels. A healthy balance with deeply losing open trades can still have dangerously low equity, and it is equity — not balance — that the broker checks against the stop-out threshold.
Because it moves tick by tick with open trades, equity is also the honest measure of how you are actually doing right now. Floating profit is real risk that can evaporate, and floating loss is real damage that is not yet booked; equity counts both, which balance refuses to do.
Watching equity rather than balance keeps you honest: an account is only as strong as its equity right now, not the profit it shows before open losers are counted. The equity curve — equity plotted over time — is the truest picture of a strategy's path, including the drawdowns the balance line hides.
On the desk we judge risk against equity at all times. Sizing the next trade off a balance that ignores three open losers is how accounts quietly over-extend; using live equity keeps every new position honestly scaled to what the account is really worth.
Frequently asked questions
- What is the difference between equity and balance?
- Balance counts only closed trades; equity adds the floating profit and loss of all open positions. Equity is the live, true value of the account and is what the broker uses for margin and stop-out checks.
- Why is my equity lower than my balance?
- Because you have open trades currently in floating loss. Equity reflects that unrealised loss immediately, while balance will only change once those trades are closed.
Related terms
Margin
The deposit a broker holds as collateral to open and maintain a leveraged position.
ReadMargin Call
A broker warning that your equity has fallen too low to support your open positions.
ReadDrawdown
The peak-to-trough decline in your account — how far you fall from a high before making a new one.
ReadBalance
The settled cash in your account — the total of all closed (realised) profits and losses.
Read
Put it into practice
Education modules
More terms in the glossary.
Vocabulary is the easy part. See how the desk turns these concepts into structured trades with defined risk on every position.