Understanding Equity in Trading: Your Guide to Account Balance and Risk Management
Equity forms the backbone of your trading journey. It determines not only how much you can trade but also how many positions you can open simultaneously. Mastering your equity is essential for effective risk management and sustainable growth in the markets.
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💰 What Is Equity in Trading?
Equity is the capital you deposit with a broker to open trade positions. Every time you fund your account, that deposit becomes your equity—your active balance available for opening new trades.
If your equity isn’t sufficient, your broker will not allow you to open positions. Think of equity as your “active” money—the funds that back every position you take and determine how much you can trade.
📊 How Equity Affects Your Trading
- Position Sizing: Higher equity lets you take larger positions; lower equity forces smaller sizes.
- Concurrent Trades: Equity governs how many open positions your account can support.
- Risk Buffer: Adequate equity helps you weather volatility without triggering margin calls.
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Deriv offers flexible account types and low minimum deposits so you can test strategies without breaking the bank.
⚖️ Active Balance vs. Withdrawable Funds
| Term | Definition |
|---|---|
| Equity | Total capital deposited plus floating P/L on open trades |
| Active Balance | Funds currently available to open new positions |
| Withdrawable Funds | Equity minus margin reserved for open trades |
📈 Other Markets & Synthetic Indices
You can also trade Contracts for Difference (CFDs) on instruments beyond Forex:
- Indices: NASDAQ, Dow Jones, Nikkei, FTSE
- Synthetic Volatility Indices: Offered by niche brokers (⚠️ caution advised). To date, Deriv remains the most trusted provider.
- Shares & Commodities: Trade global stocks, gold, oil, and more via CFDs.
⚠️ Remember: Some brokers can alter or delist synthetic indices at will. Stick with reputable providers and real assets for maximum transparency.
💡 Boost Your Equity with a Trusted Firm
FTMO’s funding programs let you trade with capital up to $200,000 once you pass their evaluation. Keep profits, build equity, and scale your strategy with confidence.
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🎥 Deep Dive: Equity and Risk Management
After funding your account, always manage your equity responsibly. Only trade with capital you’re prepared to lose, and withdraw profits regularly to keep your balance secure.