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Balance vs equity

Also called: Floating P&L · Account equity

Balance vs equity — Balance counts only closed trades; equity adds the floating profit and loss on everything still open. The gap between them is what a statement cannot show you.

Two numbers sit at the top of every MetaTrader terminal, and the difference between them is where a whole category of risk hides. Almost everything computed from a statement — including everything TapeSheet computes — uses the first one, because the second was never written down.

In plain English

Balance is the sum of your closed trades plus your deposits. It moves only when a position closes. Equity is balance plus the floating profit or loss on everything currently open, and it moves with every tick. With nothing open they are identical, which is why the distinction is easy to forget.

The consequence is specific and important: a statement is a record of closed trades, so a curve built from one is a balance curve. It cannot see where an open position travelled before it closed. A trade that ran 400 against you over three days and finally closed 50 in profit contributes exactly +50 to the balance curve. The 400 never appears anywhere in the file.

For a trader who takes stops mechanically and holds nothing overnight, the gap is small and balance-based figures are close to the truth. For a trader who holds through adverse moves, averages into losers, or runs positions for weeks, the gap can be enormous — and it is largest for exactly the people most at risk from it.

The formula

Worked example — the demo account

The demo account closes every position, so its balance and equity end identical at $26,793.45. The interesting case is the one a statement cannot show, so here is what it would look like.

A statement exported at this moment would show a flawless record. The account is a quarter under water.

That divergence is not hypothetical or unusual; it is the ordinary signature of holding losers. Every closed trade is a winner because the losers have not been closed, and the balance curve is a straight line up while the equity curve is somewhere else entirely.

It also inverts the usual reassurance. The account with the perfectly smooth balance curve and one very old open position is in more trouble than the account with a jagged curve and nothing open — and the smooth one is the one that looks better in every summary metric there is.

Every figure above is from the demo account TapeSheet ships with — 96 closed trades, generated from a fixed seed. Open the same account →

What this does not tell you

The caveat is the part worth reading. Most tools put it in a footer, if they print it at all.

• A statement contains no equity history at all. Not a limitation of our parser: MT4 and MT5 export closed trades and open positions as they stand at export time, and nothing about the path in between. No tool reading a statement can reconstruct it.
• Open positions in the file are a snapshot, not a series. Their floating P&L is whatever it was the moment you exported, and the same file exported an hour later would show different numbers.
• Balance-based drawdown always understates the real figure, by an amount nobody can compute from the file. That is why TapeSheet labels its drawdown as balance-based next to the number rather than in a footnote.
• Neither number tells you about correlated exposure. Five open positions that move together are one trade for equity purposes and five for margin purposes — the worst combination of both.

Where TapeSheet shows it

Open positions from your file are listed separately from closed trades, with their floating P&L shown as a snapshot and labelled as one. They are excluded from every performance metric, because a number that changes with the market is not a result — and the dashboard says so where the exclusion matters.

Questions

Related terms

• Equity curve — Your account balance plotted against time — the single chart that shows how a result was arrived at rather than what it was.
• Maximum drawdown — The largest fall from a peak in your account to the lowest point that followed it, before a new peak was made.
• Margin call — The point at which your equity has fallen far enough against your used margin that the broker warns you — and, a little further down, closes your positions for you.
• Margin — The portion of your balance reserved while a position is open — your own money, moved from free to used, and returned in full when you close.

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