When you have no open position, balance is the amount of the money you have in your account. When you have no position, forex trading margin level money from your account is used as the margin. Therefore all the money you have in your account is free. As long as you have no position, your account equity and free margin are the same as your account balance.
Brokers use it to determine whether the traders can take any new positions or not. This limit is called Margin Call Level. But what if the market keeps on going against you? If the market keeps on going against you, the broker will have to close your losing positions. Different brokers have different limits for this too. This limit is called Stop Out Level.
It starts from the biggest losing position. Why the broker closes your positions when the margin level reaches the Stop Out Level? The reason is that the broker can not allow you to lose more than the money you have deposited in your account. The market can keep on going against you forever and the broker can not pay for this continuous loss. How to check your account balance, equity, margin and margin level?
You can see this information by checking the MT4 terminal. The terminal will be opened and it shows your account balance, equity, margin, free margin and margin level. Balance will change only when you close the position. Balance: Is the total amount of the money you have in your account before taking any position. Free Margin: Free margin is the money that is not engaged in any trade and you can use it to take more positions. You remember what the margin was, right?
Free margin is the difference of the equity and margin. If your open positions make money, the more they go to profit, the greater equity you will have, and so you will have more free margin. Margin Call Level: Is the level that if your margin level goes below it, you will not be able to take any new position. Margin call level is determined by the broker. When you have losing positions, your margin level goes down and becomes close to the margin call level. When you have winning positions, your margin level goes up.