Before you start trading forex, you need to open a trading account with a forex broker. Once your account is approved, you deposit funds to start trading.
But what does Account Balance really mean? Let’s break it down!
1. What is Account Balance?
The Account Balance (or simply Balance) is the amount of cash you have in your trading account.
✔ Before you open a trade, your Balance is the total amount of money deposited.
✔ After closing a trade, your Balance is updated to reflect any profits or losses.
✔ If a trade is open, the Balance does NOT change (until the position is closed).
Example:
1️⃣ You deposit $1,000 → Your Balance = $1,000
2️⃣ You open a trade → Your Balance is still $1,000 (not affected).
3️⃣ You close the trade with a $100 profit → Your Balance is now $1,100.
4️⃣ You close another trade with a $50 loss → Your Balance is now $1,050.
📝 Important: Your Balance does NOT include your open trades. It only changes when a trade is closed or when a deposit/withdrawal is made.
2. How Does Account Balance Change?
Your Balance only changes in these three ways:
✅ 1. When You Deposit or Withdraw Funds
✔ If you add more money to your account, your Balance increases.
✔ If you withdraw money, your Balance decreases.
📌 Example:
- You deposit $500, now your Balance = $1,500.
- You withdraw $200, now your Balance = $1,300.
✅ 2. When You Close a Trade (Realized Profit/Loss)
✔ When you close a winning trade, your profit is added to your Balance.
✔ When you close a losing trade, your loss is deducted from your Balance.
📌 Example:
- You close a trade with +$50 profit, Balance increases by $50.
- You close a trade with -$30 loss, Balance decreases by $30.
📌 Note: Open trades do NOT affect Balance until they are closed.
✅ 3. Swap Fees (Rollover Interest)
✔ If you keep a trade open overnight, you might pay or earn swap (rollover) fees.
✔ A swap is a fee charged or credited for holding a position overnight.
✔ It depends on interest rate differentials between the two currencies in your trade.
📌 Example:
- If the swap is positive, you earn + $2, so your Balance increases.
- If the swap is negative, you pay – $5, so your Balance decreases.
3. Unrealized vs. Realized Profit/Loss
✔ Unrealized Profit/Loss (P/L): The profit/loss of open trades. It does NOT affect your Balance.
✔ Realized Profit/Loss (P/L): The profit/loss of closed trades. It updates your Balance.
📌 Example:
- You open a trade → Your Balance stays the same.
- The trade moves $100 in your favor, so you have an Unrealized Profit of $100.
- If you close the trade, the $100 is added to your Balance (now it’s Realized Profit).
4. How to Check Your Account Balance
In MetaTrader 4 (MT4) or MetaTrader 5 (MT5), follow these steps:
✔ Open Terminal Window (Ctrl + T)
✔ Click on Trade Tab
✔ Your Balance is displayed along with Equity, Free Margin, and Margin Level
📌 MT4 Account Metrics:
| Metric | Meaning |
|---|---|
| Balance | Cash in your account |
| Equity | Balance + Unrealized P/L |
| Free Margin | Available funds for trading |
| Margin Level | (Equity / Used Margin) × 100% |
5. Account Balance vs. Equity
📌 What’s the difference between Balance and Equity?
- Balance = Cash in your account (does NOT change with open trades).
- Equity = Balance + Unrealized Profit/Loss (updates in real-time as trades move).
Example:
✔ Your Balance = $1,000 and you have an open trade with +$50 profit.
✔ Your Equity = $1,050 (Balance + Unrealized Profit).
✔ If you close the trade, the $50 becomes Realized Profit, and Balance = $1,050.
6. What Happens If Your Balance Hits Zero?
📌 If your Balance reaches $0, you can’t open new trades.
📌 If your Equity drops too low, you could get a Margin Call or Stop Out.
🔴 Margin Call = Warning that your margin is too low.
🔴 Stop Out = Broker automatically closes your trades to protect against negative balance.
7. Key Takeaways
✔ Balance = Cash in your account.
✔ It changes only when you close a trade, deposit, withdraw, or pay swap fees.
✔ Unrealized P/L does NOT affect Balance until trades are closed.
✔ Balance ≠ Equity. Equity includes open trade profits/losses.
✔ If your Balance hits $0, you can’t trade.
⚠ Always monitor your Balance & Margin Level to avoid Margin Calls! 🚨
Now that you understand Account Balance, let’s move on to Margin, Leverage, and Risk Management to help you trade safely! 🚀📈
