What does “Equity” mean?
The account equity, sometimes known as “Equity,” is the current worth of your trading account. When you look at your trading platform on your screen, equity is the current worth of the account and it fluctuates with each tick.
It is the total of your account balance and any floating (unrealized) profits or losses from open positions. As the value of your existing trades rises or falls, so does the value of your Equity.
How to Calculate Equity When You Don't Have Any Trades Open
If you have no open positions, your Equity is equal to your Balance.
Account Equity When There Are No Open Trades
You make a $1,000 deposit into your trading account.
Because you haven’t yet opened any trades, your Balance and Equity are both the same. 
How to Calculate Equity When You Have Open Trades
If you have open positions, your Equity is the sum of your account balance and the floating P/L of your account.
Equity = Account Balance + Floating Profits (or Losses)
Account Equity in the Event of a Loss on an Existing Trade
You make a $1,000 deposit into your trading account. Beyoncé has tweeted that she is shorting the GBP/USD. Because she’s Beyoncé, you do as she says and keep it short.
Price instantly moves against you, and your transaction indicates a $50 floating loss.
Equity = Account Balance + Floating Profits (or Losses) $950 = $1,000 + (-$50) Your account now has $950 in equity.
Account Equity in the Event of a Winning Existing Trade
Beyoncé tweets again, this time stating that she has changed her mind. She is now long the GBP/USD. Not only is she mad in love, but she also appears to be wild in trade. But since she’s Queen B, you listen to her and go long with her. Price instantly goes in your favor, and your trade shows a floating profit of $100.
Equity = Account Balance + Floating Profits (or Losses) $1,100 = $1,000 + $100 The Equity in your account is now $1,100.
As long as you have open positions, your account equity swings in lockstep with market prices.
Equity displays the “TEMPORARY” worth of your account at the time of writing. This is why Equity is referred to as a “floating account balance.” It will only become your “actual account balance” if you immediately close all of your trades.
What's the difference between Balance and Equity?
Let us begin with a basic answer.
If your account is “flat,” or if no positions are open, your Balance and Equity are the SAME.
However, if you have open positions, the Balance and Equity will differ.
Your profit/loss from closed positions is reflected in the Balance.
The Equity represents the calculation of your profit/loss in real time. The Equity factor considers both open and closed holdings.
This means that when you look at your Balance, it does not reflect the true real-time value of your funds.
Because Equity includes current earnings or losses from open trades, it is Equity that displays the present value of your funds.
It is possible to have a huge Balance yet little Equity. This occurs when your open positions have significant unrealized (floating) losses. For instance, suppose your Balance is $1,000 and you have an open transaction with a floating loss of $900.
Your Equity is merely $100. 
Next Lesson: What is Free Margin?
