Balance is a historical number, not a live one
Balance records what has settled: deposits, withdrawals, and the results of closed trades. An open position never touches it, however large its profit or loss, and its result is added only at the moment of closing.
That makes balance a misleading measure of account health. A trader with a $1,000 balance carrying a $900 floating loss still sees 1,000 on the platform while actually owning $100. The number that reflects the live truth is equity.
Where this term sits in the account chain
The chain has a fixed order, and each term is derived from the one before it:
Balance → (add the profit or loss of open positions) → equity → (subtract the margin held) → free margin. The ratio of equity to held margin is the margin level, the single number a broker watches to decide a margin call and then a stop-out.
Learn the definitions separately and you know what each word means without knowing the price at which your account closes. Every page in this family runs the same account through the same numbers to reach exactly that price.
The formula
Balance = deposits − withdrawals + results of closed trades
A worked example
The reference account used across this family: a $1,000 balance, 1:500 leverage, and a 0.10 lot buy on gold at 2,400.00 — 10 ounces, $24,000 notional.
Margin held = 24,000 ÷ 500 = $48. Every $1 of gold price is $10 of profit or loss on 10 ounces.
Before the trade, balance and equity were both $1,000. The moment the position opens, balance freezes at 1,000 and stays there whatever the price does, while equity begins moving immediately with every dollar.
Where the same account ends up: margin call at 2,304.80, stop-out at 2,302.40. The position survives a $97.60 fall — about 4% — before the broker intervenes. Run your own numbers in the margin calculator.
Common mistakes with this term
- Reading balance as "what I have now", when it is only what has settled from the past.
- Sizing risk off balance instead of equity while losing positions are open, which understates the real percentage.
- Assuming profits can be withdrawn because the balance looks large, when what is withdrawable depends on free margin, not balance.