Equity in trading refers to the real-time value of a trader’s account, calculated by adding or subtracting unrealised profits and losses from the account balance. It’s a vital metric for understanding account health, especially when managing leveraged positions. As market prices fluctuate, so does equity. High equity means more available margin, offering flexibility to open new trades. A drop in equity can lead to a margin call, where the trader must deposit more funds to maintain open positions. Regular monitoring of equity is essential for risk management and capital preservation in volatile markets.
Example:
A shareholder’s equity represents ownership in a company and fluctuates with market valuation.
