What is Balance in Forex Trading?
Quick Answer: Balance is the total money in your account after all closed positions, excluding open trades. It only changes when you close trades, deposit, or withdraw. Balance represents your realized account value, while equity includes unrealized profit/loss.
What is Balance in Forex Trading?
Balance is the total amount of money in your trading account after all closed positions have been settled, excluding any open trades. It represents your realized account value - the money that's definitively yours, not subject to market fluctuations. Balance only changes when you close a trade, deposit funds, or withdraw money.
Balance vs Equity: The Critical Difference
Understanding this distinction can save your account:
| Balance | Equity |
|---|---|
| Static until trade closes | Fluctuates with market |
| Realized P/L only | Realized + Unrealized P/L |
| Historical record | Current account value |
| Used for withdrawal decisions | Used for margin calculations |
Practical Example
Monday morning: Your balance is $15,000. You open three trades. By Wednesday, you're up $2,000 unrealized (equity = $17,000), but balance remains $15,000. Thursday you close two trades for +$1,500 profit. Balance now updates to $16,500. The third trade is still open with +$500 unrealized, so equity is $17,000. Only when you close that final trade will balance equal equity again.
Why Balance Alone Can Deceive
Many novice traders make decisions based solely on balance, ignoring their equity. This is dangerous. You could have a healthy-looking balance while your equity has deteriorated due to large unrealized losses. Always check your margin level, which uses equity, not balance. A margin call happens when equity falls too low, regardless of your balance.
Related Terms
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