What is "Account Balance"? Understanding the Key Capital in Forex Margin Trading

2025-01-01
Terms, Learn Forex, Newbie

The account balance is the available funds in your trading, which will change when adding funds, closing trades, or paying swap fees. Understanding these changes helps in effectively managing your capital.

What is Account Balance?

Account Balance refers to the cash amount in your forex trading account, commonly known as cash or balance. This is the initial capital that traders have before starting to trade, reflecting the capital you currently have available. The account balance only changes under specific conditions, such as adding funds, closing positions, or paying/receiving swap fees (when holding positions overnight).

How does Account Balance change?

The account balance changes in the following three situations:

Adding Funds: When you deposit additional funds into your trading account, the account balance increases.
Closing Positions: When you close a trade, the profit or loss will be reflected in the account balance. The balance increases when profitable and decreases when there is a loss.
Swap Fees: If you hold a position overnight, you may pay or receive swap fees depending on the currency pair. These fees will accordingly affect your account balance.

Difference between Account Balance and other concepts

When Open Positions Exist: When you have open positions, the account balance is not immediately affected. Only when you close positions will the floating profit or loss be reflected in the account balance.

When Positions are Closed: The account balance reflects the total profit and loss of all closed trades but does not include the floating profit or loss of open positions. This makes the account balance a static value during the trading process until trades are closed or funds are further manipulated.

Summary

The account balance is the available cash amount in your forex trading, which changes after adding funds, closing trades, and paying/receiving swap fees. Understanding how the account balance changes is crucial for effectively managing your trading capital.

Supplement: What are Swap and Rollover?

Rollover

The process of transferring open positions from one trading day to another is called rollover. Most brokers automatically perform rollover operations, which means closing all open positions at the end of the day while opening a similar position for the next trading day. During this rollover process, swap fees are calculated.

Swap Fee

A swap is a fee that you will pay or receive at the end of each trading day if you hold a position overnight.

If you receive a swap fee (Paid Swap), cash will be added to your account balance.
If you are charged a swap fee (Charged Swap), cash will be deducted from your account balance.

Unless you are trading large positions, these swap fees are usually small but can accumulate over time. In the MetaTrader platform, you can view the swap fees for open positions (if you hold positions for more than 1 day) by opening the "Terminal" window and clicking on the "Trade" tab.

Popular