What is the difference between equity and margin???
Or can you please explain what is equity and what is margin?
Say that you have a $10,000 account, you open a position on EUR/USD with 1.00 lot.
That position is worth $100,000.
You have 100:1 leverage, so you only need $1,000 to open that kind of position. This money that you have to guarantee to your broker, is called margin.
Assuming that you just opened the position and you are breaking even, you have:
Balance: $10,000
Margin: $1,000
Free Margin: $9,000
You are using only $1,000 of your account, you still have $9,000 that can be used for other trades, although you have to consider that the free margin goes down if you start to lose on your trade.
Consider that you are losing $250 with your trade:
Balance: $10,000
Margin: $1,000
Free Margin: $8,750
The free margin decreases, you have $250 less that you can use, because you are losing that amount of money with the current position that you are holding.
The equity is only the difference between the balance and the current profit/loss on your existing positions. It tells you how much you really have, considering all the profits and losses you have with the positions you are still holding on the market.
In that case in which you were losing $250:
Balance: $10,000
Equity: $9,750
Margin: $1,000
Free Margin: $8,750
Hope this helps.
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You are a LEGEND thank you very much , you explained that in terms that I understand and it very clear to me thank you so very much madam/sir
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