Balance, equity and free margin all seem to indicate “how much money remains in the account”, yet they serve different purposes.
The simplest way to remember: Balance mainly shows settled funds in your account. Equity fluctuates along with floating profit and loss of open orders. Free margin tells you how much capital is still available to take new positions.
Once you hold open positions, it is recommended to focus more on equity and free margin. If you only watch the balance, you may easily underestimate the current pressure on your account.
Why the Balance Does Not Fluctuate Constantly With Market Moves
The balance records settled financial results of the account. Deposits, withdrawals, and profit or loss from closed trades are reflected in the balance. Floating profit and loss displayed on the screen for open orders will not directly alter the balance.
For example, the account balance is $1,000, and an open gold order has a floating loss of $80. If you check only the balance, it may still show $1,000. However, the actual available status of the account has changed, and this is where equity comes in.
How to Read Equity
Excluding additional credit and other factors, you may understand it through this simplified formula: Equity ≈ Balance + Current Floating Profit and Loss
Using the previous example. With a balance of $1,000 and an open order floating loss of $80, equity drops to approximately $920. If the order carries a floating profit of $120, equity rises to around $1,120.
Therefore, while holding positions, equity generally reflects the real-time account status better than balance. MetaTrader defines account fields following similar logic, incorporating floating profit/loss, commissions, credit and other items into equity calculations.
What Is Free Margin
After opening margin positions, part of your funds will be locked as margin. The remaining capital available for opening new trades or absorbing price swings is known as free margin.
The common calculation formula: Free Margin = Equity - Used Margin
Assume equity is $920 and the current position locks $200 as used margin: 920 - 200 = 720 US dollars This $720 is the remaining free margin in the account at that moment.
MetaTrader’s official basic formula for Free Margin is also Equity minus Margin.
Why Balance Can Be High While Free Margin Is Low
This is usually related to open positions. Your account may show a balance of $1,000, yet you hold large positions that consume substantial margin, plus your orders are running at a floating loss. Under such circumstances, the balance barely changes, equity falls, and free margin drops sharply.
This explains a common scenario traders encounter: “My account still has funds, why cannot I place new orders?” You need to check equity, used margin and free margin. The balance alone cannot answer this question.
How Margin Ratio Connects These Figures
The standard formula for margin ratio: Margin Ratio = Equity ÷ Used Margin × 100%
Suppose equity = $920 and used margin = $200: 920 ÷ 200 × 100% = 460%
As floating losses on open positions increase, equity declines and the margin ratio falls.
According to Lucky Gold’s current trading terms, under normal market conditions, forced liquidation will be triggered when the margin ratio falls to 30% or lower. Positions held over weekends are subject to stricter margin requirements, with the current threshold set at 200% or lower. Any updates to trading parameters shall be governed by the prevailing rules.
Which Figure to Check First When Monitoring Your Account
When there are no open positions, balance provides a straightforward reference. Once you hold positions, check equity first, then free margin and margin ratio.
When the market moves, these metrics directly show how much capital your positions occupy and how much buffer you still retain.
Balance remains important, but it works more like a completed ledger. Equity incorporates ongoing floating profit and loss.
After new traders distinguish these concepts, many common questions such as “Why can’t I open new orders despite having balance?” or “Why is risk rising while balance stays unchanged?” will be easily understood.
Risk Warning: Margin trading amplifies your account’s sensitivity to price fluctuations. Continuously monitor equity, free margin and margin ratio to avoid over-concentrated positions.