It is essential to evaluate our capital account. It can be used as the value of the account balance, i.e. the capital to consider excluding capital used in operations that can be opened or losses or profits from these open trades. However, it is much more common, and can be much more effective, use the net balance of the account (known in English as equity).
The net can be understood as the money we really have and which have at all times. There are different existing models that can be applied to calculate this value.
- Home Equity Model (Core Equity Model): This model takes into account only the account balance less the capital used to open operations, that is, the margin free. No one considers the development of these operations.
- Total Equity Model or Net Balance Total (Total Equity Model): In this model, it introduces floating profit and loss. Initial capital is subtracted from used capital to open operations, joins the floating profit and loss. The result is the actual total capital available with which we have to open operations.
- Total Equity Model Reduced or Reduced Total Net Balance (Reduced Total Equity Model): This is the pricing model of trading capital that can be more complicated and is a combination of the other two. It takes into account the initial capital less capital used to open operations and adds the benefit secured by stop loss orders in positive territory, so you can also find references to this model as Model Home EquityConquered. Also, some authors added that benefits obtained from a stop loss that, while still in negative territory, it has secured a reduction of potential losses.