GLOSSARY
Equity
What the account would be worth if every open trade closed at this second.
Updated 2026-09-05 · Educational content · No broker owns this site
Quick answer. Equity is what your trading account would be worth if every open position closed right now: the cash balance plus or minus the unrealised profit or loss on open trades. With no positions open, equity and balance are the same number.
Your platform shows two figures that look interchangeable and are not. Balance is settled money — deposits, withdrawals and the profit or loss of trades you have already closed. Equity is balance adjusted for what is happening right now in your open trades.
Equity is the live number. Balance only moves when a trade closes; equity moves with every tick.
How is equity calculated?
Take a $2,000 balance with one position open — 0.30 lots of EUR/USD, worth $3.00 a pip — sitting 40 pips underwater.
- Unrealised loss: 40 pips × $3.00 = −$120
- Equity: $2,000 − $120 = $1,880
- Balance: still $2,000, because nothing has been closed
Reverse the trade direction and the arithmetic is identical: 40 pips in your favour makes equity $2,120 while the balance sits unchanged at $2,000.
Why is equity the number that matters?
Every protective mechanism a broker runs measures equity, not balance. Free margin is equity minus used margin. Margin level is equity divided by used margin. The forced close-out that EU and UK rules require is triggered when equity falls to half the initial margin. Balance appears in none of those formulas.
What do beginners get wrong about equity?
The classic mistake is judging progress by balance while equity quietly drains. An account can show a flat $2,000 balance for weeks and be down 30% in equity, because losing positions are being held open rather than closed. Holding a loser does not postpone it — it just keeps it out of the balance column. This is one of the habits behind the loss statistics regulators publish.
Related terms
- Leverage · Margin · Equity
- Free margin · Margin level
- Margin call · Stop-out level
- Lot · Pip — the two numbers that decide how fast the margin picture moves
Frequently asked questions
What is the difference between balance and equity?
Balance counts only closed trades. Equity is balance plus or minus the profit or loss on trades still open. They are equal only when you hold no positions.
Can equity be higher than balance?
Yes — whenever your open positions are in profit. A $2,000 balance with $120 of unrealised gain shows $2,120 of equity. That gain becomes balance only when you close the trade.
Which number can I withdraw?
Neither directly. Withdrawals come out of free margin, which is equity minus the margin locked by open positions, and brokers may apply their own additional limits.
Sources
- ESMA — Additional information on the agreed product intervention measures (27 March 2018)
- FCA PS19/18 — Restricting contract for difference products sold to retail clients (2019)
- FirstPip knowledge base — concepts/leverage-and-margin (sources S007, S010, S011, S013)