What is Balance and Equity in Forex Trading?
Understanding the precise difference between Balance and Equity is fundamental to managing leverage, margin requirements, and liquidation risk in CFD and Forex trading.
What is Balance?
The Balance represents the realized, settled financial capital in your trading account.
- It reflects funds deposited, withdrawn, or realized through closed trades.
- It remains constant while positions are active; floating profits or unrealized losses do not affect your balance until the trade is officially closed.
What is Equity?
The Equity represents the real-time valuation of your account at any given millisecond. It incorporates your settled Balance plus the combined unrealized floating profit or loss across all open positions:
Equity = Balance + Floating Profit / Loss
- If you have no open positions, Equity equals Balance.
- If open trades are in net floating profit, Equity is higher than Balance.
- If open trades are in net floating loss, Equity is lower than Balance.
Real-world example
- Initial balance: $35,074.60
- A trader executes a market order: Buy XAUUSD 0.50 lots.
- Immediately upon order entry, the balance remains $35,074.60.
- If the position gains an unrealized floating profit of +$3.20, the real-time equity becomes:
$35,074.60 + $3.20 = $35,077.80 
Margin calculations, Margin Calls, and broker Stop-Out liquidations are evaluated strictly against Equity, not Balance (Margin Level % = [Equity / Used Margin] × 100). If severe floating losses pull Equity down to the broker's Stop-Out threshold, open positions will be liquidated at market price regardless of your higher balance.