Balance

Balance is the static value that represents the available capital in a trading account. It only changes when trades are actually closed or when deposits and withdrawals are made. Balance differs from equity, which fluctuates in real time with open positions; balance remains fixed regardless of market movements as long as no trades are closed.

The balance is used as a foundation for calculating several vital metrics, such as the risk percentage per trade and the appropriate lot size. When a winning trade is closed, the profit is credited to the balance, and when a losing trade is closed, the loss amount is deducted from it.

Key aspects associated with the balance include:

• It serves as a primary benchmark for calculating fixed risk percentages (such as 1% or 2% of the balance).
• It helps track a trader's cumulative performance over time, independent of open-position fluctuations.
• It is clearly displayed in account statements and trading history.

Common mistakes include confusing balance with equity when making trading decisions, or sizing positions solely based on the balance without accounting for existing floating losses that may reduce the actual usable margin.