Traders usually understand the term “balance” in the account. But, what’s equity in forex?
Account equity in forex trading represents the total current value of a forex trader’s account. When there are no open trades in the trading account equity is as same as the trading balance. When the trading account is in profit, equity is equal to the sum of balance and floating profits. When the trading account is in loss, equity is equal to the sum of balance and floating losses.
In simple words, equity refers to the money amount traders have in their trading accounts plus or minus any profit or loss from open positions.
Below you can see a video about equity in forex:
Equity formula is:
Equity = Account Balance + Floating Profits (or Losses)
Forex equity examples:
Example 1: Forex account equity without trades
Let us assume that the trader has a $1000 account.
The trader doesn’t have any open trades.
In this case: Equity = Account Balance = $1000
Example 2: Forex account equity in the profitable account:
Let us assume that the trader has a $1000 account. And trader has 1 mini lot open position 10 pips in profit:
In this case: Equity = Account Balance + Floating Profit = $1000 + $10 = $1010.
Example 3: Forex account equity in the loss account:
Let us assume that the trader has a $1000 account. And trader has 1 mini lot open position 10 pips in loss:
In this case: Equity = Account Balance + Floating Loss = $1000 – $10 = $990.
