Balance is the amount present in the account and does not include the current unrealised result from open positions. It includes the result of deposits and withdrawals, as well as the result from positions that have already been closed. Additionally, it includes cash corrections, such as dividends and splits. Positions that are closed will reflect in the balance on the next day, after the nightly data update when the status changes from "close" to "trade."
Formula: Balance = Deposit + Withdrawal + Cash correction + P&L (Net Profit)
Equity is the amount that most accurately reflects the total funds in the account. It includes the balance and the sum of unrealised profits and losses (Unrealised P/L) from positions that are still open.
Formula: Equity = Balance + Unrealised P/L
Margin is the amount that is frozen by the broker in the client's account to open and maintain a position. The calculation depends on the category of the financial instrument:
Formula:
- Forex: Margin = Σ((Volume / Leverage) * CR)
- Shares and other categories: Margin = Σ((Open price * Volume / Leverage) * CR. (CR = conversion rate from the instrument currency to the account currency). The calculation considers open positions.
Free margin is the amount of equity in the account that is not currently tied up as collateral for open positions. It represents the funds available to open new pos or withdraw from the trading account.
Formula: Free margin = Equity – Margin
Margin Level is a metric used to assess the risk of an investor's account. It is calculated as a percentage by dividing the account's equity by the used margin (the amount currently tied up in open deals).
Formula: Margin Level (ML) = Equity/Margin*100
Unrealised P/L (Profit and Loss) refers to the potential profit or loss on open positions that have not yet been closed and deals that have been closed during the current trading day according to server time. At the end of the day, based on server time, all closed deals are converted into account currency and become trades on the trading platform.
Example:
1. The client deposits $10000 into their account. Conditions: Leverage ratio is 1:20.
2. The client buys 1 share of Walmart for $77.75.
In-the-moment calculations*:
Equity: - 0.26 + 10000 = 9999.74
Margin: 77.75/20 = 3.89
Free margin: 9999.74 – 3.89 = 9995.85
Margin level: 9999.74/3.89*100 = 257062.72%
*Both the account and the instrument are denominated in US dollars, so no conversion rate is applied during calculations. If the account currency differs from the instrument currency, the conversion rate is applied when executing trades.