Balance is the settled cash after closed trades; equity is balance plus or minus everything still open. Margin rules are enforced on equity, not balance.
Balance only changes when a position closes, a swap is posted, or money moves in or out. Equity changes with every tick, because it adds floating-pnl to the balance. A trader looking at a healthy balance while equity sinks is one gap away from a forced close.
Every protective mechanism a broker runs is measured against equity: free-margin, margin-level and the stop-out-level all use it. So does a prop firm's daily loss limit in most rulebooks.
Some platforms show a third figure, often called equity after credit, which includes bonus credit the firm can withdraw at will. Treat credit as the broker's money, not yours.
Example: balance $10,000 with two open positions showing minus $320. Equity is $9,680. Close them and balance becomes $9,680 while equity is unchanged; the two numbers only agree when nothing is open.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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