Balance, equity and free margin
Balance is the money in your account excluding open trades. Equity is balance plus the current profit or loss on them. Free margin is equity minus the collateral held for open positions.
How it works
Balance only changes when you close a trade, deposit or withdraw, or when swaps and commissions are charged. Equity changes every second with price: it is what you would have if you closed everything right now.
Margin (used margin) is the collateral the broker locks for your open positions. Free margin = equity − margin: that is what is left for new trades and for absorbing moves against you. When free margin drops to zero and below, you are heading toward a margin call and stop out.
Watch equity first, not balance. Balance can show $1,000 while equity is $400 if open positions are deep in the red. Margin level and stop out are calculated from equity.
Balance $1,000. You open a position and the broker locks $300 of margin. The position is down $200. Equity = $1,000 − $200 = $800. Free margin = $800 − $300 = $500. Margin level = $800 / $300 × 100% ≈ 267%.
A common mistake is looking only at balance and thinking all is well while open trades quietly slide into loss. Balance will not show the problem until positions are closed, sometimes by force. Watch equity and free margin, and do not load the account so heavily that a small move wipes out your free margin.
Questions and answers
What is the difference between balance and equity?
Balance ignores open trades, while equity includes their current profit or loss. With no open trades they are equal.
What is free margin?
It is the part of your equity not locked for open positions. You can use it for new trades, and it is also your buffer against moves against you.
Why is my equity lower than my balance?
Because your open positions are currently losing. When you close them, that loss will be taken from your balance.
Related terms
Read next
Four ideas you need to read any forex quote.
Read →How to choose a forex broker: a beginner's checklistA broker holds your money and executes your trades, so choose one for safety, not for bonuses. Here is what to check, in order.
Read →Broker commissionA broker commission is a fixed fee per trade charged on top of the spread, usually in dollars per lot. It is typical…
Partner links are marked. If you sign up through them, ARUT may earn a commission at no cost to you. Details
Updated: 2026-10-19