Risk and performance
In trading, the balance is the account's value from closed trades only: deposits plus realised profit and loss. Equity is the balance plus the unrealised profit or loss on positions still open, so it moves with every price change. When no positions are open the two are equal. Most risk limits, including margin calls, watch equity.
A trading account usually shows four related figures.
| Figure | What it is | Changes when |
|---|---|---|
| Balance | Starting value plus realised profit and loss | A position is closed, or costs are charged |
| Equity | Balance plus open profit and loss | Price moves on any open position |
| Used margin | The deposit held for open positions | Positions are opened or closed |
| Free margin | Equity minus used margin | Price moves, or positions change |
The balance lags reality: a position losing heavily does not touch it until closed. Equity shows what the account would be worth if everything were closed now. That is why margin calls and most prop firm loss limits are measured on equity - see equity-based drawdown - and why a trade can breach a limit while still open.
The difference between the two is exactly the open PnL.
Trailing limits need a peak to trail from. Some use the highest balance, updated only when trades close; others use the highest equity, which includes open profit at its best. The intraday trailing drawdown page covers the difference, which can be large for a trader who lets open profits reverse.
Step by step
Read both numbers before every new trade.
Worked example
An illustrative sequence on a $100,000 simulated account. It is not a record of real trades.
The loss counted against equity from the moment it appeared. Closing the trade only moved it into the balance.
Common mistakes
An account can be close to a limit while its balance looks untouched.
Equity already reflects the loss; waiting does not undo it.
Commission and swap reduce the balance even on trades that break even on price.
Limitations
No chart concept predicts price. These are the limits worth keeping in view.
In an evaluation
GFN's daily loss limit counts closed and floating losses together - 3% on Instant and 5% on 1 Step and 2 Step - so it is an equity-based limit. On a $100,000 account it is $3,000 on Instant or $5,000 on 1 Step and 2 Step, and an open position can reach it before it is closed.
Questions
Keep learning
Risk and performance
What Is PnL? Profit and Loss in Trading
What PnL means, the difference between realised and open profit and loss, and how costs turn a gross result into the number that counts.
Risk and performance
Intraday Trailing Drawdown, Explained
A trailing loss limit that moves up with your highest equity during the day, including unrealised profit - and why that makes giving back gains costly.
Risk and performance
Notional Value in Trading, Explained
The full market value behind a leveraged position - how it is calculated, how it differs from margin, and what notional volume and notional limits measure.
Sources
Educational content only, not investment advice or a recommendation to trade. Chart concepts describe what price has done; none of them predicts what it will do, and trading any strategy can lose money. Get Funded Now accounts are simulated and trade virtual funds. Last reviewed 22 September 2026.
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