Your account has two headline numbers. Balance is your starting balance plus the profits and losses of trades you have closed. Equity is your balance plus or minus the running profit or loss on trades that are still open.
Example. You start with $10,000 and open a trade that is currently down $300. Your balance is still $10,000, because nothing has closed. Your equity is $9,700.
Why it matters
If a rule measures loss on equity, the open loss counts straight away. With a 5% daily limit on $10,000, the limit is $500. That $300 floating loss has already used 60% of it, and you have not closed anything.
- On balance, only closed trades count.
- On equity, everything counts as it happens, so it is the stricter of the two.
- Each challenge states which one it uses. Check before you trade.
A common trap
Holding a losing trade in the hope it will come back feels like not taking a loss. Under an equity rule, that trade counts against you every moment it stays open.
This is general information, not advice. It does not consider your situation, and trading carries a high risk of loss.