Equity is the real-time value of your trading account, taking into account all open positions. It equals your cash balance plus the unrealized profit or loss on all open trades. Equity changes every second when the market is moving and positions are open. Balance, by contrast, only changes when a trade is closed — equity is the live figure.
Equity vs Balance
Balance: The cash in your account from completed (closed) trades. Only updates when a trade is closed.
Equity: Balance ± open P&L. If your balance is $10,000 and your open positions are currently down $400, your equity is $9,600. If they're up $600, your equity is $10,600.
Brokers calculate margin requirements, margin level, and margin calls based on equity — not balance. This is why monitoring equity (not just balance) is essential when positions are open.
Equity and Margin Level
Margin level = (Equity ÷ Used Margin) × 100%. Brokers typically issue a margin call warning when this falls to 100% and begin force-closing positions at 50%. The calculation uses current equity, so a falling equity from an open loss brings you closer to a margin call even if your balance hasn't changed.
Example: $10,000 balance · $2,000 used margin · Open position is down $7,500 · Equity = $2,500 · Margin level = ($2,500 ÷ $2,000) × 100% = 125% — approaching the margin call threshold.
Risk of the Equity Trap
Many traders risk too much on a single position because they calculate risk against their balance rather than equity. If your equity is already below balance due to an open losing position, using balance as the base for a new trade's risk percentage means your actual exposure is higher than intended. Always calculate new position sizes relative to current equity, not balance.