Balance, equity, margin and free margin: what your terminal is telling you

Your platform shows five numbers along the bottom of the screen, and a beginner usually watches the wrong one. Balance is what you had when your last trade closed. Equity is what you have right now. The decisions your broker makes about your positions are made on equity — and balance can sit there unchanged while the account is being emptied.

This is the row of figures you look at every day without being told what it means. Here is each number, where it comes from, and which of them decides whether your positions stay open.

The five numbers, and which of them actually move

Only one of these is money you have earned or lost for good. The other four are a live description of a position that has not finished yet.

Balance and equity: the gap between them is your open trade

Balance changes when a position closes. Until then it is history: a record of what happened before the trade you currently have on. Money you pay in or take out moves it too — but nothing price does while the trade is open.

Equity is balance plus whatever your open positions are worth at this instant. If you are down $300 on a live trade, your equity is $300 below your balance, and that difference closes to zero the moment you exit, in whichever direction the trade ended.

So the two numbers agree exactly when you have nothing open, and diverge the rest of the time. That divergence is the whole point: a trader watching balance during an open trade is reading a number that cannot tell them anything about the trade.

Free margin is not spare cash

When you open a leveraged position your broker sets part of your capital aside as margin — collateral, not a fee. It is returned when the position closes. What is left over is your free margin.

The name invites you to read it as money available to trade with, and it is that. But it is also, and more importantly, the thing absorbing your current losses. Our leverage explainer puts both jobs in one line: free margin "can be used for new trades or to absorb existing trade losses". The second job is the one that matters when a trade is going badly, because free margin is the cushion that shrinks before the broker intervenes.

Which means opening a second position and holding a losing first one draw on the same pool. They are not independent.

Margin level is the number the broker is watching

Margin level is equity divided by used margin, expressed as a percentage. At 400% your equity is four times the collateral being held. At 100% it is exactly equal to it.

There is a small piece of algebra here worth seeing, because it explains why two different readings arrive together. Free margin is equity minus used margin, and margin level is equity over used margin. So free margin hits zero at exactly the moment margin level hits 100% — not by coincidence, but because they are the same fact written two ways. When your platform shows free margin at zero on an open position, the margin level beside it reads 100%, always.

What it looks like, from open to the edge

Take the trade from our margin calculation post: one standard lot of EUR/USD at 1.0850 on a USD account, at 1:100. Notional is $108,500, so the margin held is $1,085. Say the balance is $5,000. Every figure below follows from those two numbers and the size of the move — the pips are just the price distance on 100,000 units.

Read the balance column. It never moves. Through a loss that takes the account from comfortable to nearly closed out, the number a beginner checks says $5,000 the entire way down.

Note also that in this table free margin goes negative before anything is closed, because we have assumed a stop out lower than 100%. It is not an error — it says your equity no longer covers the collateral your open position requires. At a broker whose stop out sits at 100%, the positions go at the row above and free margin never turns negative at all.

One caveat on the collateral itself: the table assumes the $1,085 stays put. Some platforms recalculate it as the exchange rate moves, in which case it drifts a little and the exact pip counts above shift with it. The mechanics are identical either way, and so is the algebra — only the precise trigger distances move.

One last word on that 1:100: in almost every regulated market it is not available to a retail trader. Our leverage explainer above puts the ceiling on majors at 30:1 in the European Union, the UK and Australia, and at 50:1 in the United States, with 20:1 on non-majors in both the European Union and the United States. At 50:1 the same trade would lock $2,170 rather than $1,085; at 30:1 it would lock $3,616.67 and leave just $1,383.33 free. Each of those is a tighter version of the same lesson.

What actually triggers a margin call?

Two different events, and they are often talked about as one.

• The margin call is a warning. Margin level falls past the broker's first threshold and you are told to add funds or reduce exposure. Nothing is closed yet — but the warning is a broker practice rather than a guarantee, and a fast enough move can cross both thresholds before it reaches you.
• The stop out is the broker acting. Margin level keeps falling, and the broker closes positions for you, usually starting with the worst one. It does not ask.

The thresholds themselves live in your broker's contract specifications, not in the price. Our own post on whether you can lose more than you deposited says only "a set level", because there is no universal number — it varies, and your broker publishes its own figures in the contract specifications rather than leaving you to find them out the day they fire. The 100% and 50% rows in the table above are there to show the mechanics, not to state your broker's figures. Look yours up; the arithmetic works the same whatever they are.

It is also worth being clear about whose interest the stop out serves. As that post puts it, the automatic close "isn't there to protect you, it's there to protect the broker's money": the broker is the one exposed if your account crosses zero, and that is why the close is aggressive and automatic. It is also why that post says it works "nearly every time" rather than always — the exception is the next section.

Who absorbs a shortfall that does happen is a separate question. That post calls negative balance protection a regulatory obligation in some jurisdictions and not in others; where it does not apply, the bill can reach you instead.

What the terminal does not tell you

The five numbers describe this instant accurately and say nothing about the next one.

• They assume a price exists to close at. The close-out mechanism needs price to pass through the levels in between. Through a weekend gap or a jump on news it does not, and the stop out can execute well past where the arithmetic suggested.
• A healthy margin level is not a small position. Margin level compares equity to collateral, and collateral shrinks as leverage rises. The exposure lives in the notional — $108,500 in the example above, not the $1,085 held against it.
• None of them shows you the thing most likely to end the account. An ordinary losing streak never arrives as a single dramatic reading; it takes equity down in steps, one closed trade at a time, which is why risk of ruin needs no extraordinary event.

The takeaway

Balance is a receipt. Equity is your position. Used margin is what is locked. Free margin is your remaining room, and margin level is the same room expressed as the ratio your broker acts on.

A margin call is not a market event — it is the broker's threshold being crossed, on a number that has been sliding since the trade opened. If you want to see it coming, watch the margin level and ignore the balance, which will look fine until the moment the positions are gone. And the reliable way to keep that number far from any threshold is not to monitor it more closely, but to open a smaller position in the first place.