The short answer
Balance is the money in your trading account from deposits, withdrawals and trades you have already closed. It does not move while a position is open.
Equity is what your account would be worth if you closed every open position right now. It equals your balance plus or minus the profit or loss on open trades, called floating P/L. It changes with every price tick.
With no open positions and no credit on the account, balance and equity are the same.
Ready to try it on a real or demo account?
Partner link · trading carries a high risk of loss
A worked example in words
Suppose you deposit money and open a buy position on a currency pair.
- Right after opening: the price you can close at is the bid, which sits below the ask you paid. Because of this spread, the position usually starts slightly negative. Equity is already a little under balance. Balance has not changed, unless a commission was charged on entry.
- The price falls: the floating loss grows. Equity drops further below balance. Balance still shows the original figure.
- The price rises above your entry: the floating P/L turns positive. Equity is now above balance.
- You close the trade: the result moves into the balance. Floating P/L goes back to zero, and balance and equity match again.
To see this with real figures, use the profit and loss guide or the tools on the calculators page. Enter the pair, lot size, entry price and current price. A demo account trade shows the same thing live, with no real money at risk.
Why equity is the number that matters for risk
Margin checks use equity, not balance. These values are built on it:
- Free margin = equity − used margin. This is what is left for new positions.
- Margin level = equity ÷ used margin × 100, shown as a percentage.
- Margin call and stop out are triggered when the margin level falls to the levels your broker sets.
A healthy balance can hide trouble. If open trades are deep in loss, equity may be close to the stop-out level even though the balance looks unchanged. Leveraged forex and CFD trading can lose money fast. Watch equity, not balance, while positions are open. The risk management guide covers position sizing.
Precise definitions for experienced traders
| Field (MT4/MT5) | What it contains | Changes when |
|---|---|---|
| Balance | Deposits − withdrawals + realised P/L of closed positions, net of swaps and commissions already booked | A trade closes, money moves in or out, or a charge is booked |
| Credit | Funds a broker adds to the account that are not part of the balance and usually cannot be withdrawn | The broker adds or removes it |
| Floating P/L | Unrealised profit or loss of open positions at current close prices (bid for buys, ask for sells), including accrued swap | Every tick, and at rollover |
| Equity | Balance + Credit + Floating P/L | Every tick |
| Margin | Margin locked by open positions | Positions open or close, or leverage or margin rules change |
| Free margin | Equity − Margin | Every tick |
Points worth knowing:
- Swap. Overnight swap builds up on the open position and counts in floating P/L. It is booked to balance when the position closes. Check your terminal's history to see how your account shows it.
- Commission. Depending on account setup, a per-lot commission may be taken from the balance at entry, at exit, or split between the two. If it is charged at entry, balance drops as soon as you open the trade.
- Credit. Credit raises equity and therefore free margin. It is not your own money. Read the terms of any credit on your account to see when it can be removed. If it is removed, equity and margin level fall straight away.
- Hedged positions. On hedging accounts, opposite positions each carry their own floating P/L. Equity reflects their net result.
What is equity in MT5?
In MetaTrader 5, open the Toolbox window and go to the Trade tab. The summary line shows Balance, Equity, Margin, Free Margin and Margin Level. Credit appears only when it is not zero.
In MT4 the same line sits in the Terminal window. Both platforms recalculate equity on every incoming price. Accounts in Pakistan rupees or US dollars work the same way. Values are shown in the account currency.
Frequent questions
What does equity mean in forex?
Equity is your balance plus credit plus the floating profit or loss of open trades. It is the value your account would have if you closed everything at current prices.
Why is my equity lower than my balance?
Your open positions are in loss overall, often only because of the spread just after entry. The gap closes once you close the trades or prices move in your favour.
Can I withdraw equity?
You can withdraw only from realised funds, within the free margin your broker allows. Floating profit becomes withdrawable once the position is closed and booked to balance.
Does balance include open trades?
No. Balance covers closed results and money moved in or out. Open trades affect equity only.
Which value triggers a stop out?
Equity, through the margin level. A falling equity, not balance, leads to a margin call and then a stop out. The trading glossary defines the related terms.