FAQ Section | Frequently Asked Questions
Equity refers to the equity share of an investor or company. In the trading and investment context, the term usually refers to the value actually belonging to the investor, i.e. assets less all liabilities. In the case of trading accounts, equity corresponds to the current account value including open profits and losses.
Example / association: A trading account is capitalized with €10,000. Open positions currently show an unrealized loss of € 1,200. The equity of the account is therefore €8,800 - not the original balance, but the real equity value at the current time.
Equity in margin trading refers to the current net account value of a trading account. It results from the account balance plus all open profits and minus all open losses. Equity is the key figure for margin calculation, risk monitoring and possible forced liquidations.
Example / association: A trader starts with a balance of €5,000. Open positions currently stand at +700 € profit and -1,500 € loss. → Equity = 4,200 €. Even if the starting balance is still €5,000, the broker assesses the risk solely on the basis of the equity, not on the basis of the original deposit amount.
Exposure describes the overall economic risk to which a trading account is exposed to one or more markets. It takes into account position sizes, direction (long/short) and correlations between positions. High exposure means a strong dependence on the market development.
Example / Association: A trader holds several long positions in technology-heavy stock indices. → Although there are several trades, the exposure is heavily concentrated on one market sector. If the technology sector falls, the losses have a cumulative effect on the equity.
Expectancy measures the average expected profit or loss per trade based on historical results. It combines hit rate and average profit/loss ratio and is one of the most meaningful key figures for assessing a trading strategy.
Example / association: A trader wins 40% of his trades with an average of +€300 and loses 60% with -€150. → The expectancy is positive, although more trades are lost than won.
In real trading, concepts have an operational rather than a theoretical effect. Whether balance, equity or margin - every concept has direct consequences for scope for action, risk and possible intervention by the broker. Explanations of terms are therefore not an academic accessory, but an instrument for risk control. Those who misunderstand terms not only make poor decisions, but often systematically underestimate the actual exposure of their own account.
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