What is mark to market
Mark to market means valuing an open position or asset at its current market price instead of the price you paid for it.
Your profit or loss is recalculated as prices move, before you close anything. The gain or loss shown this way is unrealised. It becomes realised only when the position is closed. See capital gain and loss.
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A worked example (hypothetical)
Suppose you open a buy position on XAUUSD at an entry price we call P.
- At entry: the position is marked at the current bid. The bid sits below your entry because of the spread, so the position shows a small loss straight away.
- Price rises: the bid moves above P. The platform marks the position at that new bid and shows a floating profit equal to the price difference times your position size.
- Price falls below P: the same position is now marked at a loss. Your equity drops even though you have not closed the trade.
To put real figures on a case like this, use the tools on the calculators page.
Where the term appears
Trading platforms
In MT4 and MT5, every open position is marked to market on each price update:
- Floating profit/loss is the marked value of each open position.
- Equity is your balance plus the floating profit/loss.
- Margin level and stop-out are calculated from that marked equity.
If marked losses push equity down far enough, positions can be closed automatically. Leveraged CFD and forex trading can lose money fast, and mark-to-market is how that loss shows up in real time. See risk management.
Exchanges and clearing
On futures exchanges, a central counterparty marks every contract to market at least daily. Gains and losses are settled in cash as variation margin, so losses cannot pile up unpaid. See clearing and settlement and collateral.
Banks and official rates
Banks revalue their foreign-currency positions at an official rate. The State Bank of Pakistan publishes a daily Mark-to-Market Revaluation Exchange Rate for USD/PKR for this purpose.
Accounting and news
Mark to market accounting (fair value accounting) records assets at what they would sell for today. In news coverage, the term often comes up when banks or funds report large write-downs during market stress.
Precise definition and edge cases
Under fair value accounting standards, an asset is measured at the price that would be received to sell it in an orderly transaction between market participants on the measurement date. The inputs come in three tiers:
- Quoted prices for identical assets in an active market.
- Observable inputs, such as prices of similar assets or yield curves.
- Model inputs, used when no market price exists. This is often called mark-to-model.
Edge cases experienced traders should know:
- Bid, ask or mid. Platforms usually mark a buy position at the bid and a sell position at the ask. Accounting may use the mid price.
- Illiquid markets. If an asset rarely trades, the last price may be stale. A forced mark can then overstate or understate its value.
- Gaps. Over a weekend or market close, the next mark can jump past your stop level.
- Procyclicality. Falling marks can trigger margin calls and forced selling, which pushes marks down further.
Related terms
Frequent questions
What is mark to market in simple words?
Valuing what you hold at today's price, not at the price you paid.
Is a mark-to-market loss a real loss?
It is unrealised until you close the position. It still reduces your equity and can trigger a margin call or stop-out.
What is the difference between mark-to-market and mark-to-model?
Mark-to-market uses observed market prices. Mark-to-model uses a valuation model when no reliable market price exists.
Does mark-to-market change my account balance?
In MetaTrader it changes your equity, not your balance. The balance changes when a position is closed and the result is realised.