Account Equity
Account equity is your balance plus or minus the unrealized result of open positions — what the account would be worth if everything were closed now.
Your account balance only changes when trades close. Your equity changes every tick. It is the number that tells you what you actually have right now — and the one margin rules watch.
- Category
- Risk Management
- Reading time
- 3 min
- Also called
- Equity, Account value, Net liquidation value
- Updated
Equity in plain words
On a trading statement, equity is what the account would be worth if everything were closed out at today's prices.1
In leveraged trading, equity is the value of open positions minus the debt used to open them.2
In practice: equity = balance + open profit − open loss. See Realized and Unrealized P&L.
How to calculate account equity
Start with the balance
Take the cash balance after closed trades and fees.
Add open profits
Add unrealized gains: equity reflects the account as if closed at current prices.1
Subtract open losses
Subtract unrealized losses on the same basis.1
Account for borrowed funds
With leverage, count position value minus the debt used to open it.2
Compare with margin
Compare equity with margin used to see your buffer; low equity can trigger a margin call.
Track it over time
Measure Drawdown from peak equity, not from balance.
Worked examples
Example 1 — One open winner
$10,400Balance $10,000. Open trade +$400.
| Equity | $10,000 + $400 = $10,400 |
Equity reflects what the account is worth if liquidated at current prices.1
Example 2 — Mixed positions
$7,400Balance $8,000. Trade A +$300, trade B −$900.
| Net open P&L | −$600 |
| Equity | $8,000 − $600 = $7,400 |
Equity is the residual value assuming everything was closed now, so the open loss already counts.1
Example 3 — Leveraged position
$5,000You hold a position worth $20,000 bought with $15,000 borrowed.
| Position value | $20,000 |
| Debt | $15,000 |
| Equity | $5,000 |
In margin trading, equity is the value of open positions minus the debt used to open them.2
Equity vs related numbers
| Aspect | Includes open P&L? | Used for |
|---|---|---|
| Balance | No | Closed results |
| Equity | Yes | Current account value |
| Used margin | No | Collateral locked in trades |
| Free margin | Yes, via equity | Room for new trades |
Why equity matters
Margin checks
Brokers compare equity with Margin requirements.
Risk sizing
Basing Position Sizing on equity, not balance.
Drawdown tracking
Measuring Drawdown from equity peaks.
Loss limits
Applying daily Daily and Weekly Loss Limits to equity.
Advantages and disadvantages
Advantages
- Shows real-time account value.
- Includes open risk, not just closed trades.
- Is what margin rules use.
Disadvantages
- Moves constantly with prices.
- Can look healthy until a sudden move.
- Definitions vary slightly by broker.
- Open profits are not locked in.
Going deeper
Read as far as you need. Each level builds on the one before it.
Balance plus open P&L
Beginner
Equity is the account value assuming it was liquidated at current prices.1
Equity with leverage
Intermediate
With borrowed funds, equity is position value minus debt, so leverage makes it swing faster than the position.2
Equity as the risk anchor
Advanced
Because equity already includes open losses, risk limits based on equity react sooner than limits based on balance.1 Pair equity tracking with Value at Risk or stress checks.
Common mistakes
Sizing on balance
Ignoring open losses when sizing new trades.
Counting open profit as banked
Spending unrealized gains.
Ignoring fees
Forgetting financing and fees reduce equity.
Watching balance only
Missing a growing open loss.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Equity = balance ± open P&L.
- It is the value if everything closed now.
- With leverage, subtract borrowed funds.
- Margin rules use equity.
- Size risk on equity, not balance.
Frequently asked questions
Is equity the same as balance?
Can equity be negative?
Does equity include fees?
Further learning
- Realized and Unrealized P&L
The open results inside equity.
- Margin
What equity is compared with.
- Drawdown
Measuring falls in equity.
- Position Sizing
Sizing trades from equity.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- U.S. Commodity Futures Trading Commission. CFTC Glossary (opens in a new tab) Checked .
- IG. Equity Definition | What Does Equity Mean (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.