Definition:
In trading, equity is the real-time value of a trading account, calculated as the account balance plus or minus the floating profit or loss from open positions.
Explanation:
Equity shows the true worth of an account at any moment. It changes continuously as open trades gain or lose value.
The basic formula of equity in trading is:
Equity = Balance ± Floating Profit/Loss
Balance represents the closed results of all past trades.
Floating Profit/Loss (P/L) refers to the unrealized gain or loss from open positions.
In practice, if you have no open trades, equity is equal to your account balance. But once you enter a position, equity begins to fluctuate in real time with market movements.
💻 On MT4/MT5 platforms:
Equity is displayed automatically in the Terminal window under the “Trade” tab. Traders can monitor it alongside Balance, Margin, Free Margin, and Margin Level. Since it updates tick by tick, it provides the most accurate picture of your account health at any given moment.
For example, if your account balance is $10,000 and your open positions currently show a –$800 loss, your equity will show as $9,200 on MT4/MT5. If the market turns and those same positions move to a +$500 profit, your equity will rise to $10,500 in real time.
Equity is a key factor in margin calculations and determines whether you can open new trades or risk a margin call.
Equity = Account Balance ± Floating Profit/Loss
If those trades turn into +$300 profit, then:
Many traders confuse equity with balance or free margin. Balance reflects closed trades only, while equity shows the real-time value of the account, including open positions. Free margin, on the other hand, is the amount available to open new trades after accounting for used margin. Understanding these differences helps traders manage risk and avoid margin calls.
Related Terms: Balance, Margin, Free Margin, Margin Call, Stop Out
Always monitor your equity, not just your balance. Balance shows past results, but equity shows the real-time impact of your open trades.
✅ Manage equity risk with our Copy Trading Platform
✅ Use Forex Signals that control drawdown and protect equity
✅ Read our Blog for guides on margin, balance, and equity management
