Balance vs Equity vs Free Margin: What Is the Difference?

Balance, equity, free margin and margin level explained with one worked example — what each number means on MT5, how they move when a trade moves, and which one triggers a stop-out.

Balance is the money in your account after deposits, withdrawals and closed trades. Equity is that balance adjusted for the profit or loss on positions still open. Free margin is the part of equity not currently held against open positions.

Key Takeaways

• Balance changes when trades close or money moves. Equity changes every tick.
• Free margin = equity − used margin. It is what you have available to open new positions or absorb losses.
• Margin level = equity ÷ used margin × 100. It is the number the stop-out watches.
• A large balance with a small free margin is an account close to its limit.

The Five Numbers, Defined

All five appear in the MT5 terminal along the bottom of the Trade tab.

Worked Example: One Account, One Trade, Three Moments

Start with $5,000 and no open positions. Then buy 1.00 lot EURUSD at 1.0850 with 1:200 leverage, which requires $542.50 of margin.

Notice what does and does not move. Balance sits at $5,000 through the entire losing trade and only drops when the position closes. Equity tracks the loss in real time. Free margin falls with equity. And the margin level — the number the platform uses to decide whether you are still solvent — falls from 922% toward the stop-out threshold.

(Illustrative at 1.0850, USD account, maximum leverage. Spread, commission and swap are excluded so the mechanics stay visible; in a live account the opening floating P/L is slightly negative by the spread.)

Margin Level and the Stop-Out

Margin level is the ratio that matters. When it falls to the broker's margin call level, the platform warns you. When it falls to the stop-out level, the platform begins closing positions automatically, starting with the largest loss, until the ratio recovers.

In the example above, a single 1.00 lot position on a $5,000 account would need a very large adverse move to reach stop-out. Now imagine five lots instead of one. The same 300-pip move would be a $15,000 loss on a $5,000 account — but it never gets that far. At $10 per pip per lot, five lots lose $5,000 after 100 pips, and the stop-out closes positions well before equity reaches zero. Negative balance protection covers what a gap might push past it. This is the mechanism explained in how leverage increases trading risk.

MarketsAll's margin call and stop-out levels are set on the MT5 server and shown in the account terms. All MarketsAll accounts carry negative balance protection, so the balance cannot fall below zero.

Why It Matters

Traders watch balance because it is the reassuring number. It is also the least informative one. Balance tells you what happened; equity tells you what is happening; free margin tells you how much room you have left.

Position sizing is, in these terms, the practice of keeping used margin small relative to equity so that free margin stays large and margin level stays far from the stop-out. An account with $10,000 of balance and $200 of free margin is not a $10,000 account in any useful sense.

Risks Related to These Numbers

• Reading balance as available funds. Balance includes money already held as margin and ignores floating losses.
• Adding positions on free margin alone. Free margin can vanish in one adverse move across correlated positions.
• Not knowing the stop-out level. It is a fixed number; the only variable is how close you let margin level get to it.

Why is my equity lower than my balance?

Because you have open positions with a floating loss. Equity = balance + floating P/L; a negative floating P/L pulls equity below balance.

Can equity be higher than balance?

Yes, when open positions are in profit. The difference is unrealised until the positions close.

What is a safe margin level?

There is no single figure, but the further from the stop-out level the better. Many traders treat a margin level in the hundreds of percent as normal and become cautious as it approaches 200%.

What happens at stop-out?

The platform automatically closes open positions, starting with the largest loss, until the margin level rises back above the stop-out threshold. On MarketsAll accounts, negative balance protection means the balance cannot go below zero even if a gap moves through the stop-out.

Is free margin the same as available balance?

No. Free margin is equity minus used margin. It moves with open positions; balance does not.

Related Terms

Margin · Leverage · Swap · How leverage increases trading risk · Position sizing