July 27, 2022 - 03:20 PM 345 views
The meaning of "Account Balance" in forex trading?
You must create an account with a retail forex broker or CFD provider in order to begin trading forex.
You can transfer money into the account after it has been approved.
This new account should only be funded with “risk capital”, which is cash you can afford to lose.
The initial balance of your account is known as the "Account Balance" or simply "Balance."
It's essentially the amount of CASH that is in your account.
Consider it like this:
Your Balance indicates how much money is in your trading account.
Your Balance is $1,000 if you deposit $1,000.
Your account balance is unaffected by fresh trades or, in trader parlance, "opening new positions" until the position is CLOSED.
This means that just one of three things can happen to your Balance:
When you deposit new money into your account.
When a position is closed.
When you receive or pay a swap/rollover fee while keeping a position open over the course of the night.
Although the ideas of a swap and a rollover are unrelated to the topic of margin, we'll briefly explain them anyway because swap fees do have an impact on your Balance.
Just be aware that there is a difference between a trade that you leave open overnight and one that lasts a few hours.
A rollover is the process of transferring open positions from one trading day to another.
Most brokers carry out the rollover automatically at the end of the day by cancelling any open positions and concurrently starting a similar position for the next business day.
A swap is computed during this rollover.
If you keep your deal open overnight, a swap is a FEE that is either paid or charged to you at the end of each trading day.
Cash will be put toward your Balance if you get a swap payment.
If you're charged a swap fee, money will be taken out of your balance.
These swap costs are often tiny, but they can build up over time, especially if you're trading large position sizes.
If you retain an open position in Meta Trader for more than a day, you can view swaps on it by opening a "Terminal" window and selecting the "Trade" option.
Although it is outside the purview of this course and won't be further covered, we wanted to briefly touch on the idea of swap and rollover for the sake of accuracy.