What is the difference between equity and balance?
Quick answer
Balance is the account value from closed trades only. Equity is balance plus the floating profit or loss of open positions, so it shows what the account would be worth if everything were closed now. Most prop firm loss limits are measured on equity, because it reflects risk that is already on the table.
Detailed answer
The two figures are equal when nothing is open. They separate as soon as a position moves.
A worked example
A $100,000 account closes trades for a $1,500 profit: balance is $101,500. The trader then opens a position that is $2,000 in loss. Balance stays $101,500, but equity is $99,500.
Why firms use equity for limits
If limits used balance, a trader could hold a large losing position indefinitely without breaching, as long as they never closed it. Measuring equity stops that, because open losses count as they happen. It also works the other way: a trader with a large floating profit is closer to the profit target on equity than their balance suggests, which is why some firms only count the target once positions are closed. State which approach you use.
Where balance still matters
- Profit target: some firms measure it on balance, so floating profit does not count until closed. Others use equity.
- Daily reference: the day's starting point for the daily loss limit may use balance, equity or the higher of the two.
- Payouts: usually calculated on closed profit.
State which figure each rule uses. PropExecutor measures loss limits and the profit target on equity, and opens each day's daily loss limit on the higher of balance and equity at the UTC day change, so a floating loss carried overnight does not reset the allowance lower.
PropExecutor team · Updated
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