Picture a hypothetical account denominated in Polish zloty (PLN), with a balance of ten thousand zloty and a single open position on the euro against the dollar, currently underwater by three hundred zloty. Your balance still reads ten thousand, yet your equity has already slipped to nine thousand seven hundred. The broker has locked roughly three thousand three hundred and thirty-three zloty as a deposit against that position, leaving six thousand three hundred and sixty-seven of free capital and a margin level of two hundred and ninety-one per cent. Five different numbers describe the very same account in the very same second. Below I explain what each of them really means.

Three numbers that describe one account

Balance, equity, margin, free margin and margin level describe different aspects of the account at the same moment. Balance is the booked total; equity also includes valuation and other adjustments. Used margin describes required collateral, while free margin and margin level help interpret capacity under the actual account rules. Reconcile the fields with the transaction history rather than treating them as separate past and present snapshots.

A hypothetical discrepancy between a deposit and displayed equity need not be a platform fault or hidden fee. Reconcile booked operations, floating P/L and any credit or blocked amounts before drawing a conclusion. The same account can show several valid figures because each field answers a different question.

Balance — booked account operations

Balance is the sum of every booked operation since the account was opened: deposits minus withdrawals, plus realised profits, minus realised losses, adjusted for swap points. The crucial word is realised. Balance records booked operations. Floating price P/L is not realised merely because a position is open, but fees, funding, deposits or withdrawals can affect balance before the position closes.

Floating price moves alone do not change the booked balance. It can nevertheless change while a position remains open when a deposit, withdrawal, fee or funding adjustment is booked. Use the transaction history to reconcile changes rather than assuming the morning’s balance must remain fixed.

In our example the balance is 10,000 zloty. This hypothetical example assumes no additional booked fees, funding, deposits or withdrawals. Under those assumptions, floating price P/L does not change balance before the position closes.

First establish where the commission was booked

A six-zloty discrepancy need not mean a missing trade. It can arise when you deduct a history fee again from a balance that already includes it.

Scroll sideways to see the full diagram

Commission already booked in balanceAn 8,000 PLN balance becomes 7,994 PLN after a 6 PLN commission. With price-only floating P/L of −94 PLN, equity is 7,900 PLN. Deducting that fee again would incorrectly give 7,894 PLN.ONE FEE, ONE DEBITBalance before fee: 8,000 PLNA 6 PLN commission is booked.Balance: 7,994 PLNPrice-only floating P/L: −94 PLNEquity = 7,994 − 94 = 7,900 PLNThis fee is already in balance.7,994 − 94 − 6 = 7,894 PLNThis calculation deducts the same fee twice.

Original hypothetical PLN account: balance before commission 8,000 PLN, one 6 PLN fee booked immediately, current price-only P/L −94 PLN. No credit, blocked amounts, funding, other fees or flows. The commission is not separately accrued or blocked. MT5 describes different commission-booking methods.

Fee history explains the balance. It is not an instruction to deduct the same amount again.

The opposite case also needs attention: an accrued fee may not yet be in balance. Use the actual account fields and provider rules. The diagram does not prescribe one display method for every broker; it reconciles a specific entry without charging it twice.

Equity — the balance with open positions included

In the simplified example, equity is balance increased or decreased by the unrealised result of all open positions — in the jargon, floating P/L, floating because it shifts with every tick. Equity is therefore a living number: when the market moves your way it rises above balance, and when it moves against you it drops below, when no other balance operation is booked. Account credit, accrued commission or blocked amounts can also affect displayed equity; check the account’s calculation rules.

Equity is a current valuation under the account’s rules, not a guaranteed liquidation receipt. Closing fills can differ from valuation quotes and can add commission or other charges. The final booked balance therefore need not equal the equity displayed before closing.

In our example the position is underwater by 300 zloty, so equity reads 9,700 — 10,000 of balance minus 300 of floating P/L. Had it been 300 in profit, equity would read 10,300, while balance stayed at 10,000 either way. With no open position, floating price P/L is zero. Equity equals balance only when other equity components such as credit, accrued commission and blocked amounts are absent. A difference alone does not prove an open position.

Margin — the deposit locked under a position

Margin, also known as the security deposit or used margin, is the slice of capital the broker locks while you hold a position — neither a fee nor a commission, but funds set aside against potential losses. Under this simplified linear margin model, it equals notional value divided by the assumed leverage. Actual margin depends on the symbol’s calculation mode, rates, conversion and account rules. At the hypothetical exact 1:30 leverage used here, opening a position with a notional value of a hundred thousand zloty means locking one thirtieth of that amount.

A hundred thousand divided by thirty is 3,333.33 PLN before rounding. This is the required collateral in the hypothetical model, not a fee or a borrowed cash balance. On closure the margin requirement changes, while the realised result and charges also affect available funds. The amount of collateral does not cap the possible loss.

The relationship is simple: the larger the position, the more capital gets frozen and the less freedom you have left. With the same linear margin rule, two lots instead of one double required margin. Free margin becomes equity minus that larger requirement; it does not generally halve.

What changes when required margin rises?

A requirement can change while a position remains open. Read the current account and instrument specification and the provider’s notice. Own USD model: equity is 1,400 while margin rises from 1,000 to 2,000. Price, open P/L, costs and other blocks are held fixed. Free margin changes from 400 to −600, and margin level from 140% to 70%. The ratio falls solely because its denominator increases.

This calculation snapshot does not promise that the provider will keep the position open. The consequences of negative free margin and any closures depend on the account rules, product and event sequence. Check other open positions too. Reading the cash balance alone cannot establish those conditions.

Higher requirement, unchanged equity

Higher requirement, unchanged equityOwn USD model: equity 1,400, required margin increases from 1,000 to 2,000. Free margin changes from 400 to −600; margin level from 140% to 70%.Equity unchanged1,400fixed model equityMargin × 21,000 → 2,000free margin: −600Margin level140% → 70%denominator changed
Own USD model: equity 1,400, required margin increases from 1,000 to 2,000. Free margin changes from 400 to −600; margin level from 140% to 70%.

Model a change in required margin

Own model: equity stays fixed and only required margin changes. All monetary values share the same account-currency unit.

Compare the reading with the specification before another decision. The closure rules are developed in the margin call and stop-out guide.

Free margin and margin level — the buffer and the compass

Free margin is simply equity minus the locked deposit. It indicates capacity under the account’s margin rules; it is not necessarily withdrawable cash. Floating losses can reduce that capacity, and new orders must still satisfy the provider’s checks. In our example equity is 9,700 and the deposit 3,333, so free capital comes to 6,367 zloty — capacity under this model’s margin rule.

Margin level compares equity with used margin as a percentage, provided used margin is positive. Here 9,700 divided by rounded 3,333 gives about 291%. A higher percentage gives more room relative to that requirement; it does not by itself establish safety or describe possible gaps, changing margin and the risk of the remaining exposure.

Read free margin and margin level together with current exposure, costs and the actual close-out rule. A ratio is not a guaranteed distance in price or time to forced closure. At zero margin, the quotient is undefined rather than 0%; use a separate no-margin indication.

What happens when margin level falls

In the simplified example, used margin is held constant while floating losses reduce equity and margin level. At 100%, equity equals used margin and free margin is zero. The margin-call threshold and notification policy are provider-specific; 100% is not a universal warning threshold. New-order acceptance requires the account’s margin checks.

Stop-out means compulsory position closing under the account’s margin rules. The historical ESMA retail-CFD intervention and Poland’s KNF decision require an account-level close-out safeguard below half the aggregate initial margin protection for open CFDs. Current national and provider rules must be checked; there is no universal liquidation order, exact execution price or 100% advance warning.

So margin level is not trivia but an early warning system. A falling ratio indicates a smaller margin buffer, but two hundred per cent is not a universal sizing boundary. Judge the actual account thresholds, combined exposure, price risk and execution uncertainty. Choose and monitor volume against a stated loss budget and a separate margin constraint — sound risk management is precisely about keeping that distance.

How to read these numbers — three actions before a position

Before you click buy or sell, run through these three checks using current figures and the actual account terms.

  1. Compare balance with equity. If they differ, inspect floating P/L and other equity components, including credit, accrued commission and blocked amounts; the difference alone does not prove an open position. Understand where it comes from before you add anything new. Equity is a current valuation under the account’s rules, not a guaranteed amount available on liquidation.
  2. Check the new order’s actual margin requirement. Use the symbol’s calculation mode, rates, conversion and provider terms; division by a single leverage figure only describes the stated simple model. Compare the requirement with current capacity and the planned loss budget. Acceptance of an order does not establish that its size is appropriate.
  3. Look at margin level after opening. Compare the resulting ratio with the provider’s thresholds and your chosen buffer. A wide margin ratio does not guarantee that price swings or gaps cannot cause a breach; assess stop-based loss exposure separately. The mechanics of position sizing are worth working through before, not after, you trade.

These three numbers — balance, equity and margin — are not platform bureaucracy but the instrument panel of your account. A pilot does not take off without watching the gauges; a trader should not open a position without understanding what equity and margin level are saying. Learn to read them by reflex and you will make far more decisions in the cold light of reason than in the heat of emotion.