What is a trading account
A trading account is an account you hold with a broker that keeps your money and records every position you open, change or close.
It is separate from a bank account. The broker's systems value it in real time and calculate your profit, loss and margin. In forex and CFD trading, the account is also the collateral for your open positions.
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Precise definition and edge cases
More formally, a trading account is a ledger that a broker keeps under a client agreement. It records:
- Balance: deposits, withdrawals and closed results.
- Open positions: each with its contract size, entry price and floating result.
- Equity: balance plus or minus the floating result of open positions.
- Margin and free margin: money held against open positions, and the amount still available.
Edge cases experienced traders meet:
- Demo accounts use virtual money and have no legal claim on funds. See the demo account page.
- Sub-accounts: a single client profile can hold several trading accounts with different account currencies, leverage or pricing.
- Dormant accounts may carry inactivity fees at some brokers.
- Who the counterparty is: with CFDs the broker is often your counterparty. See A-book and B-book.
Worked example (hypothetical)
Asma opens a forex trading account in US dollars and deposits money. Her balance and equity are equal.
She opens a EUR/USD position. Part of her equity is set aside as margin, and her free margin falls by that amount. The price moves against her. Her balance stays the same, but her equity falls, so her free margin shrinks. If her margin level falls to the broker's stop-out level, the platform starts closing positions automatically.
To put real figures on this case, use the margin and pip tools on the calculators page. Leveraged trading can lose money fast, and losses can wipe out the deposit. See risk management.
Where the term appears
- MetaTrader: the account number and server appear at login. The Trade tab shows Balance, Equity, Margin, Free margin and Margin level. See MetaTrader 5.
- Reports: an account statement lists deals, fees and swaps. Your equity curve is drawn from the account's history.
- News and regulator notices: "trading account" is often used about licensed brokers and offshore platforms.
Opening a trading account in Pakistan
Before you open a trading account in Pakistan, know what the regulators say:
- The supervisor is the Securities and Exchange Commission of Pakistan (SECP), with trading in listed securities and commodities only via SECP-licensed securities and futures brokers.
- Broker lists: per the SECP, lists of licensed brokers are on the PSX and PMEX websites.
- On offshore platforms, per the SECP, offshore forex/CFD platforms operate without regulatory approval in Pakistan, and per the SECP, offshore platforms have no Pakistani licence or oversight and offer no legal protection or recourse.
- On offshore forex payments, per the SBP, remitting foreign exchange to overseas forex/margin/CFD platforms is not allowed through any payment channel (FERA s.5(1)), and per the SBP, the purchase of offshore forex/margin/CFD products by Pakistani residents violates section 4(1) of FERA 1947.
Read Regulation and Safety before you open any account. Broker-specific terms are covered on account types.
Related terms
Exposure, dealer, custodian, order fill, swap fees, trading glossary.
Frequent questions
What does trading account mean in simple words?
It is your account at a broker. It holds your money and records your trades and results.
Is a forex trading account the same as a bank account?
No. A forex trading account is valued in real time, and your open positions can reduce its equity. A bank account only holds money.
What is the difference between balance and equity?
Balance includes only closed results. Equity also includes the floating profit or loss of open positions.
Can I open a trading account in Pakistan with an offshore platform?
Read the SECP and SBP positions above and the Regulation and Safety page first. Check that a broker is licensed through the lists the SECP points to.
Does a demo account count as a trading account?
It works the same way on the platform, but it uses virtual money.