Equity vs balance
Balance is the settled cash in a trading account from closed trades, and equity is that balance adjusted by the running profit or loss on any open positions.
With no trade open, the two are equal. The moment a position is open, equity moves tick by tick with its unrealised profit and loss while balance stays fixed, and the two reconcile again only when the position closes and its result is booked into the balance.
This page covers the mechanic; it is not trading advice.
The two account numbers that disagree
Every trading platform shows both a balance and an equity figure, and beginners often read them as the same number because, before the first trade of the day, they are. Balance is the cash the account has actually banked: the sum of every closed trade's result plus deposits and withdrawals. Equity is what the account is worth right now, this second, with open trades included.
The gap between them is unrealised profit and loss. Open a position and it starts showing a floating result that changes with every price tick. That floating amount is added to or subtracted from the balance to give equity: equity = balance ± open profit or loss. A $10,000 balance with an open position $200 in profit shows $10,200 of equity; the same balance with the position $200 down shows $9,800. The balance has not moved, because nothing has been banked yet.
The distinction matters because the broker acts on equity, not balance. Equity is the figure that feeds Margin level, the ratio the broker watches to decide when to warn and when to force-close positions. An account can show a healthy balance and still sit near a stop-out if open losses have pulled equity far below it. Reading only the balance hides how much the open book has already given back.
Watching the two diverge on one trade
Follow a single position from open to close and the relationship is exact at every step. Start with a $10,000 balance and no open trades: balance $10,000, equity $10,000, identical. Open 1 standard lot of EUR/USD at 1.0850, where each Pip is worth $10, and the floating result moves $10 for every pip the price travels.
While the position is open, balance is frozen at $10,000, because it records only closed results. Equity carries the live figure. Close the position at 1.0880 and the $300 gain is realised: balance rises to $10,300 and equity equals it again, since there is no longer an open trade to adjust for. Had the position closed at 1.0820 instead, both would settle at $9,700.
Two open positions, one equity
With more than one position open, equity is the balance adjusted by the net of all floating results at once. A $10,000 balance holding one trade $400 in profit and another $150 down shows equity of $10,000 + $400 − $150 = $10,250. Balance still reads $10,000. This is why a single equity number, not a per-trade figure, is what the account is judged on: the broker nets the whole open book against the balance to get the equity every Margin and margin-level calculation then uses.
Where the two figures sit among the account numbers
Balance and equity are the first two lines of the account panel, and the figures beneath them are built from equity, not balance. Free margin is equity minus the margin held against open positions, and margin level is equity divided by that used margin. Both track equity, so both move with open profit and loss while balance sits still. A trader reading the balance for a sense of safety is reading the one number that ignores every open position, while the figures that decide whether the broker steps in sit downstream of equity.
Deposits and withdrawals move balance directly, and equity with it, because neither is an open-trade result. A $2,000 deposit into a $10,000 account holding no positions takes both balance and equity to $12,000 at once. The two figures diverge only on open-position profit and loss; every settled event, whether a closed trade, a deposit, or a withdrawal, lands in the balance and is mirrored in equity the same instant.
A common misreading is that a rising balance means the account is growing. Balance changes only when a trade closes or funds move in or out, so an account can bank a run of small closed profits, showing a climbing balance, while one large open loss quietly drags equity below the starting point. That unbooked shortfall is an unrealised Drawdown, real on the equity curve even though the balance has not recorded it. Equity is the honest figure while trades are open; balance is the honest figure only once they are closed.
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Common questions
What is the difference between balance and equity?
Balance is the settled cash in the account from closed trades, deposits, and withdrawals. Equity is the balance adjusted by the profit or loss on any open positions. With no trade open the two are equal. Once a position is open, equity moves with its floating result while balance stays fixed, and they match again only when the position closes and its result is banked into the balance.
Why is my equity lower than my balance?
Because one or more open positions are showing a floating loss. Equity is the balance minus the current open loss, or plus the current open profit. A $10,000 balance with an open position $300 down shows $9,700 of equity. The balance has not changed, because the loss is not banked until the trade closes, but equity reflects it immediately. If the trade recovers, equity rises back toward the balance; if it closes at a loss, the balance falls to meet equity.
Which number does the broker use for a margin call?
Equity. The broker divides equity by the margin held to get the margin level, and the margin call and stop-out act on that ratio. Balance does not enter the calculation. An account can hold a comfortable balance and still reach a stop-out if open losses have pulled equity down far enough, which is why watching only the balance can hide how close the account is to a forced close.
Do balance and equity include open profit?
Only equity does. Balance counts profit and loss from closed trades; open trades do not affect it until they are closed. Equity counts both: it is the balance plus or minus the running result of every open position. The difference between the two figures at any moment is exactly the net floating profit or loss of the open book.