Reconciling Your Account Equity

Reconciling Your Account Equity

This article addresses the following questions:

How do I reconcile my Account Equity?
How are Profit/Losses reflected in my Account Equity?

How do I reconcile my Account Equity?

First, before you get started, you'll need to understand some basic concepts.

Your Account Equity is calculated DAILY using the following information:

Trade Date Balance (CASH VALUE)

+ Total Market Value:  The total Value of your current inventory/stock and options positions

plus + or - any Deposits, Withdrawals, Position Adjustments

= Account Equity

Let's follow a hypothetical first trade so you can see how a trade transaction affects your Account Equity.

Example: You just deposited 10,000.00 into your account.  Your Starting Trade Date Balance (CASH VALUE) is $10,000. 

   $10,000 Trade Date Balance (Cash Value)
+ $0 Total Market Value
= $10,000 Account Equity

You make your first trade and buy 100 shares of a $50 stock (100 x $50 = $5,000).

The stock is now in your portfolio (and your stock goes up in value a few hours after you bought it, and closes at $51). You hold the position overnight.

The following day your account reflects as follows:

$5,000 Trade Date Balance (Cash Value)
$5,100 Total Market Value (100 shares of stock valued with a market price of $51)
$10,100 Account Equity ($5,000 cash value + $5,100 (stock portfolio value) = $10,100

After a few days, the stock you purchased at $50 is STILL trading at $51. You decide to sell the stock and take the profit.  You sell your 100 shares at $51 and complete no other transactions.

The following day your account reflects as follows:

Trade Date Balance (CASH VALUE)= $10,100
Total Market Value = 0 
Account Equity = $10,100

Notice that the Account Equity is still $10,100 (Start of day),  but also notice after selling 100 shares @ 51 you reduced your total market value by $5100 and credited $5100 to your Trade Date Balance (CASH VALUE). There was no change (up or down) from the $51 mark to market price from the previous day, and your Account Equity is still $10,100 (the gain was already reflected into your Account Equity.

Here's an example if you had bought the stock at $50 and the stock was trading at $49 (at a loss):

$5,000 Trade Date Balance (Cash Value)
$4,900 Total Market Value (100 shares of stock valued with a market price of $49)
$9,900 Account Equity ($5,000 cash value + $4900 (stock portfolio value) = $9,900

If you sell at $49, the following day your account will look like this:

Trade Date Balance (CASH VALUE)= $9900
($5000 +$4900) 100 shares sold at 49 = $4900
Total Market Value = 0 
Account Equity = $9900

Note: If your Account Equity is Down

If your TRADE DATE BALANCE (Cash Value) + TOTAL MARKET VALUE +/- MONEY MOVEMENTS (deposits, withdrawals, position adjustments) etc. results in lower ACCOUNT EQUITY, then your account realized a NET Loss from the previous day and/or your TOTAL MARKET VALUE (current holdings) may be down from the previous day.

Portfolio/inventory positions (and value) move up or down based on the nominal $ value of holdings and are marked to market at the closing price of each day and reflected in your Total Market Value.
 

The APEX Clearing Report Center automatically calculates all of your balances for you.

To reconcile your daily balances on your own, you can do so by using the following fields on Apex Clearing

Trade Date Balance (CASH VALUE) (Net your daily debits vs credits from your trade activity report)

+ Total Market Value:  The total Value of your current inventory/stock and options positions

plus + or - any Deposits, Withdrawals, Position Adjustments

= Account Equity

Follow along with these two illustrations:

Illustration #1

 

Illustration #2

Find the TRADE DATE BALANCE (CASH VALUE) and add the TOTAL MARKET VALUE then subtract or add any deposits, withdrawals or position adjustments. This calculation will equal your ACCOUNT EQUITY.

How are Profit/Losses Reflected in My Account Equity?

Profit and Losses are already calculated daily into your Account Equity.  APEX Clearing calculates your balance at the end of each trading day using the following information: 

Trade Date Balance (CASH VALUE)

+ Total Market Value:  The total Value of your current inventory/stock and options positions

plus + or - any Deposits, Withdrawals, Position Adjustments

= Account Equity

Mark to market accounting values your assets at current market closing prices.  Therefore your account equity includes and reflects the current value of all of your holdings (Trade Date Balance (Cash Value), Portfolio Value, and any other money movements(including check deposits, withdrawals, etc) at the start of each trading day .  

"Mark to Market" was implemented industry wide and assets are valuated on a daily basis.

**APEX calculates account balances every trading day and provides historical account information here: apexclearing.com