Balance, Funds, Margin and Level - what MetaTrader 4 describes
Despite the variety of all possible trading terminals, the MetaTrader 4 platform is still the most popular tool for trading in the foreign exchange market. The interface of the MetaTrader 4 trading platform is intuitive and does not require any special education. Nevertheless, the seemingly simplest things sometimes cause questions for Beginning traders.
In order to assess your trading account or make a decision to open or close a trade, a trader needs to constantly monitor the main indicators of his account. The MetaTrader 4 terminal has five such indicators: Balance, Funds, Collateral or Margin, Free or Free Margin, and Level. These indicators are available in the "Terminal" tab.
Let's take a closer look at what each of the five indicators of a trading account means.
Indicator "Balance" of your account in MT4
Balance is an indicator that displays the amount of money on the trader's trading account. The peculiarity of the "Balance" indicator is that it does not take into account the profit or loss on open trades, and fixes only available funds, as well as plus and minus on closed trades.
For example, the account had $10,000. Two trades were closed. One with a profit of $500, the other with a loss of $498. Thus, the balance is 10,000 + 500 - 498 = $10,002.
Indicator "Funds"
The indicator "Funds", unlike the indicator "Balance", also takes into account the current results on open trades. In simple words, Funds is the money that will be on the balance if you close all open trades.
For example. The balance is $10,002. A Buy trade was opened in the EUR/USD pair. The current loss on the trade is $22. Accordingly, the indicator "Funds" is equal to 10,002 - 22 = $9,980. That is, if the trader closes the deal right now, with a loss of 22 dollars, the amount of 9,980 dollars from the "Funds" will go to the "Balance".
Indicator "Collateral" or "Margin"
As you know, the easy accessibility of trading in the foreign exchange market provides leveragewhich allows the trader to pay only a portion of the amount required to open an order. The indicator "Margin" just displays this amount. The amount of margin depends on the amount of leverage used. The bigger is the leverage, the less is the sum of margin. At a leverage of 1:10 the size of the pledge for transaction opening will make 10% of the necessary sum, at a leverage of 1:100 the pledge will make 1%.
For example, the trader opens a buy deal in EUR/USD pair with the volume of 1 standard lot. As you know, a standard lot is 100,000 units of currency. That is, the trader buys 100,000 euros for dollars. The current price is 1.11995. Thus, $111,995 are needed to open a deal. The leverage on the trading account is equal to 1:200, which means that to open the deal the trader needs 111 995 : 200 = 559,98 This is what we see in the "Margin" indicator (the result is rounded from 559.975).
Free" or "Free Margin" indicator
The indicator "Free Margin" shows the amount of funds on the account available for opening trades. It is calculated simply: Free = Funds - Margin (Margin)
Accordingly, in our example, the indicator "Free" is 9,980 (Funds) - 559.98 (Collateral) = 9,420.03 (the result is rounded because the bond is actually $559,975).
Indicator "Level"
The "Level" indicator is probably the most important of all of the above. It shows the ratio of the "Funds" indicator to the "Margin" indicator, expressed as a percentage.
Let's return to our example. The indicator "Level" will be equal to 9,980 (Funds) : 559.98 (Deposit) x 100% = 1782.22%.
The Level indicator is directly related to the stability of open trades. Why is it so important? Simple mathematics. The more trades opened, the greater the denominator, in which we have the "Margin" indicator. If the loss on one or more trades grows, respectively, in the numerator the value of "Means" decreases, and the denominator of "Margin" remains unchanged.
Brokers and DCs in their trading regulations, which for some reason few people look at, indicate the threshold value of the indicator "Level", at achievement of which the open transactions will be closed forcibly. Often this situation becomes an unpleasant surprise for traders and causes claims to companies.
Now that incomprehensible numbers and percentages have a sufficiently clear meaning, the trader will be able to more adequately assess his trading opportunities, increasing his "Balance" indicator and never having to deal with Margin Callom..
But the level or stop out is different for all brokers. Why this is so, I still can't understand...
Thank you, everything is simple, accessible and understandable))) I'll add the articles to my favorites))