How to Calculate Equity If You Have Trades Open

If you have open positions, your Equity is the sum of your account balance and your account’s floating P/L.

Equity = Account Balance + Floating Profits (or Losses)

Example: Account Equity When an Existing Trade  is  Losing

You deposit $1,000 in your trading account.

Beyoncé tweets that she’s shorting GBP/USD. Because she’s Beyoncé, you follow what she says and go short also.

Price moves immediately against you and your trade shows a floating loss of $50.

Equity = Account Balance + Floating Profits (or Losses)

$950 = $1,000 + (-$50)

The Equity in your account is now $950.

Example: Account Equity When an Existing Trade is Winning

Beyoncé tweets again and says she’s changed her mind. She’s now long GBP/USD.

Not only is she Crazy in Love, but she seems crazy in trading also.

But because she’s the Queen B, you follow what she says and go long also.

Price moves immediately in your favor and your trade shows a floating gain of $100.

Equity = Account Balance + Floating Profits (or Losses)

$1,100 = $1,000 + $100

The Equity in your account is now $1,100.

Your account equity continuously fluctuates with the current market prices as long as you have any open positions.

Equity shows the “TEMPORARY” value of your account at the current time. (Unlike a tattoo, which is…not temporary.)

That’s why Equity is seen as a “floating account balance“. It will only become your “real account balance” if you were to close all your trades immediately.