What Is Equity in Forex? Balance Plus Floating P/L

Open a trade and your balance does not change. The number that moves with every tick is your equity. It tells you what your account would be worth if you closed everything at the current price.

What does equity mean in a trading account?

Say your account holds $2,000 and you have no trades open. Your balance is $2,000, and your equity is $2,000 too.

Now you open a trade, and it shows a floating profit of $40. Your balance is still $2,000, because nothing has been closed. Your equity is $2,040.

Equity is your account balance plus or minus the floating profit or loss of your open trades:

Equity = balance + floating profit or loss

A floating loss is a negative number, so it pulls equity below the balance. With a $60 floating loss, the same account has equity of $2,000 − $60 = $1,940.

When no trades are open, nothing is floating, so equity and balance are equal.

How does equity move during one trade?

Here is one trade with round illustrative prices. Your balance is $2,000, and you buy 0.50 lot of EUR/USD at the ask of 1.10000.

Work out the pip value. A pip on EUR/USD is 0.0001, and 0.50 lot is 50,000 euros, so one pip is 50,000 × 0.0001 = $5.
Just after you open, the bid is 1.09990. A long trade is valued at the bid, so you are 1 pip down: a floating loss of $5, and equity of $1,995.
Later the bid reaches 1.10300. That is 1.10300 − 1.10000 = 0.00300, or 30 pips, and 30 × $5 = +$150. Equity is $2,150.
Later still the bid falls to 1.09600. That is 0.00400 below your entry, or −40 pips, and −40 × $5 = −$200. Equity is $1,800.

Bid	Pips from entry	Floating P/L	Balance	Equity
1.09990	−1	−$5	$2,000	$1,995
1.10300	+30	+$150	$2,000	$2,150
1.09600	−40	−$200	$2,000	$1,800

Through all of this the balance never moved. It changes when a trade closes, and some brokers also book costs such as commission to it straight away.

A line chart of one 0.50 lot EUR/USD trade where the balance stays flat at $2,000 while equity starts at $1,995, rises to $2,150 at a bid of 1.10300 and falls to $1,800 at a bid of 1.09600. — Balance waits for the trade to close, while equity follows every price change.

If you closed the trade at a bid of 1.10300, the $150 would become realised profit. The balance would rise to $2,150, nothing would be floating, and equity would also be $2,150.

How do you work out equity with several trades open?

Add up the floating results of every open trade first, then add that total to the balance. A profit on one trade offsets a loss on another.

Say your balance is $2,000. Your EUR/USD long shows +$150, and a USD/JPY short you also hold shows −$90. The net floating result is $150 − $90 = +$60, so equity is $2,060.

A step chart showing a $2,000 balance, plus a EUR/USD floating profit of $150, minus a USD/JPY floating loss of $90, giving equity of $2,060. — Net the floating results of all open trades, then add them to the balance.

The platform does this sum for you. In MetaTrader, equity appears in the account line of the Trade tab, next to balance, margin and free margin.

Swap built up on a trade held overnight also counts toward equity before the trade closes. Your platform may show it in its own column, apart from the price profit.

If a broker adds a bonus as credit, MetaTrader counts that credit inside equity as well. Bonus credit usually cannot be withdrawn, so read the bonus terms before you rely on it.

Why does your broker watch equity?

Equity is the money that would be left if every trade closed now, so your broker builds its margin checks on it.

Free margin is equity minus used margin.
Margin level is equity divided by used margin, times 100.

Go back to the EUR/USD trade. With leverage of 1:100, used margin on 0.50 lot at 1.10000 is 50,000 × 1.10000 ÷ 100 = $550. Assume it stays at $550 while the trade is open.

Equity	Used margin	Free margin	Margin level
$2,150	$550	$1,600	390.9%
$1,800	$550	$1,250	327.3%

Used margin stayed the same, yet free margin and margin level both fell because equity fell. A losing trade therefore shrinks your room to open new ones.

Many brokers set a margin call level and a stop out level as margin level percentages. The levels differ between brokers, so treat 100% and 50% here as illustrative.

With used margin of $550, a 100% margin level means equity of $550. A 50% level means equity of $275.

For equity to reach $550, the floating loss must be $2,000 − $550 = $1,450. At $5 per pip that is 1,450 ÷ 5 = 290 pips, a bid of 1.07100.

For equity to reach $275, the loss must be $1,725. That is 1,725 ÷ 5 = 345 pips, a bid of 1.06550.

A vertical equity scale for a 0.50 lot EUR/USD long with used margin of $550, showing equity of $2,000 at 1.10000, a 100% margin call at $550 after a fall of 290 pips to 1.07100, and a 50% stop out at $275 after 345 pips to 1.06550. — Margin call and stop out are triggered by equity, so a floating loss alone can reach them.

The margin calculator works out used margin for other pairs, trade sizes and leverage settings.

Balance or equity: which number matters more?

Balance records what has already happened. Equity shows where you stand right now, so it is the better guide whenever trades are open.

A large balance can hide a weak account. With a $2,000 balance and a $1,500 floating loss, your equity is $500, and that $500 is what the margin rules see.

Equity also moves when you are not watching. Prices can jump on a news release or over a weekend, so equity on Monday can open far from where it closed on Friday.

Drawdown, the fall from a peak, can be measured on either number. Measured on equity, it includes losses you are still sitting in, which balance alone does not show.

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Is equity the same as balance?

Only when no trades are open. With open trades, equity is the balance plus or minus their floating profit or loss.

Can equity be higher than balance?

Yes. When your open trades are in profit overall, equity is above the balance by the size of that profit.

Can equity go below zero?

In a very fast move, a stop out can close trades at worse prices than its level, so equity can fall below zero. Whether you must cover a negative balance depends on your broker's terms, so check whether it offers negative balance protection.

Can I withdraw my equity?

Floating profit cannot be withdrawn until the trade closes and the profit reaches your balance. With trades open, brokers usually limit withdrawals so enough margin stays in the account.

Does swap affect equity?

Yes. Swap on a trade held overnight counts toward equity, so it raises or lowers equity before the trade closes.