What Are the Key Forex Trading Formulas?

In forex trading, key account metrics help traders monitor risk and manage capital effectively. Below are the essential formulas:

1. Balance

Balance refers to the total amount of money in your trading account, excluding open trades. Profits and losses are added or deducted only after closing a trade.

2. Equity

Equity represents the real-time value of your account, including the floating (unrealized) profits and losses from open trades.

Formula:
Equity = Balance + Floating Profits – Floating Losses + Credit

3. Margin

Margin is the amount of capital required to open a trade, calculated based on leverage.

Formula:
Margin = (Contract Size × Lot Size) ÷ Leverage

4. Trade Volume

Trade volume represents the size of a trade and is determined by multiplying the contract size by the lot size.

Formula:
Trade Volume = Contract Size × Lot Size

5. Free Margin

Free margin is the remaining available funds in your account after accounting for the margin used in open trades.

Formula:
Free Margin = Equity – Margin

If no trades are open, Free Margin = Balance.

6. Margin Level (%)

Margin level is a key indicator of account health, showing how much of your available funds are being used for margin.

Formula:
Margin Level (%) = (Equity ÷ Margin) × 100

A margin level below 100% may result in a margin call, meaning you need to add funds or close positions to maintain your trades.