Account equity in forex trading represents the total current value of a forex trader’s account. When there are no open trades in trading account equity is as same as 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.
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.
