In trading, equity refers to the total value of an investor's account. It represents the actual amount of capital an investor has, including any profits or losses from open positions.
Example:
An investor deposits $10,000 into a trading account. They open a trade that initially shows a profit of $500. Their current equity would be $10,500. If the trade then turns to a loss of $200, their equity would be $9,800.
Balance in trading refers to the total amount of money in a trading account when all open positions have been closed and all profits/losses, as well as any commissions or fees, have been settled. It does not include the floating (unrealized) profits or losses of currently open positions.
Example:
An investor deposits $10,000 into a trading account. Their initial balance is $10,000. They open a trade that is currently showing an unrealized profit of $500, making their equity $10,500. However, their balance remains $10,000 until the trade is closed. If they close the trade for a $500 profit, their new balance would be $10,500.