When you decide to enter the trading arena, one of the first actions you take is to open a trading account with a trusted broker like Traders Trust. To start investing on the financial markets, you need access to a trading platform such as MetaTrader4 (MT4), either via downloading it to your mobile or computer or by opening it directly in your browser. Once you log in the platform, you will be able to see among other features, five of the most important features of your trading account which show you the status of your invested capital – Balance, equity, margin, free margin and the margin level.
In this educational article, we will focus on explaining what balance in MT4 is while showing how it’s connected to your trading activity.
What is the balance?
Your MT4 balance reflects the capital you invested, plus or minus any closed trades, if any. For example, if you open a trading account, deposit $1,000 and open the MT4 platform, your balance will show $1,000.
When does my balance change?
Your balance is not affected when you open trades. However, when you close a trade, any profit or loss will be reflected in your balance. So, for example, if you have make a profit of $500 on a trade, once you close it, your balance will show $1,500.
Your balance also changes when you either withdraw from or fund your trading account. If, for example, your balance is $1,500 and you deposit another $2,000, your trading account balance will be $3,500. If you withdraw $3,000 from your $3,500 account, your balance will fall to $500.
In short, your balance can change in 2 instances, when you close a position or when you deposit or withdraw from your account.
Trading note: Your balance will not change if you have open positions, it will only change once you close them.
What does Negative Balance Protection Mean?
After getting a good grasp of the concept of balance, a question that may cross your minds is: if my balance does not change with open trades, can I lose my entire balance without noticing it?
The Margin Call feature alerts you when you don’t have enough funds to keep trades open on a market. Thus, the MT4 platform will turn red once you reach the Margin Call level specific to your account type. When you get a margin call, you can close trades to free up more margin, put more funds into your account or ride out the adverse market movement in case it reverses. Stop Loss and Take Profit are additional tools available on the MT4 which can be used for risk management purposes, to limit your loss or simply lock in your profits.
Most commonly, an account can go into a negative balance after market gaps following the weekend, low liquidity on the markets or even a highly important news event. However, Traders Trust offers you negative balance protection which ensures that you do not lose more than your invested capital. If an account goes into a negative balance, Traders Trust can restore your balance to zero.
Understanding how a trading system works, such as the balance of your MT4 account, allows you to make informed trading decisions. Stay up to date with our latest trading education articles to enhance your understanding of essential trading concepts and unlock the door to reliable and informed investment decisions.