Published on: 2025-12-19
Market To Market (MtM) refers to the process of valuing an asset based on its current market price, rather than its historical cost. Market prices never stand still.
The moment a price changes, the value of an open trade changes with it. Market To Market, or MtM, is the method that captures this reality by updating the value of assets and positions using current market prices.
Instead of relying on what an asset cost in the past, MtM shows what it is worth right now. This makes it an important concept in trading, risk control, and financial reporting. For traders, understanding Market To Market is essential because it directly affects unrealized profit and loss, margin levels, and the true financial state of an account at any given moment.
Market To Market, or MtM, is the method that captures the value of an open position change by updating the value of assets and positions using current market prices.
Instead of focusing on what an asset cost in the past, MtM shows what it is worth right now. This makes it a core concept in trading because it directly affects unrealized profit and loss, margin levels, and overall account health.
This method is widely used in finance and trading to reflect the actual value of an asset or liability, ensuring transparency in financial reporting.
Market To Market works by updating the value of open positions using the most recent market price. In many trading platforms, this happens in real time as prices change. In other cases, positions are marked at specific times, such as at the end of the trading day using an official settlement price.
The timing of MtM depends on the market and product being traded. Forex and CFDs are typically marked continuously, while futures and some derivatives are marked once per day. Regardless of timing, the purpose is the same, to reflect the current value of positions based on real market prices.
This regular revaluation ensures that profits, losses, and margin requirements are always aligned with current market conditions, not past prices.
Market To Market values change whenever prices move. Several factors influence how fast and how much they change.
Price movement: Any rise or fall in price immediately updates MtM profit or loss.
Market volatility: Faster price swings cause larger MtM changes.
Market liquidity: Low liquidity can lead to sharper price moves, affecting MtM quickly.
Daily settlement rules: Some markets reset MtM values using official settlement prices.
When markets are calm, MtM changes are small. When markets are unstable, MtM can shift sharply within minutes.
Market To Market directly affects trading decisions and account management. Floating losses reduce available funds, while floating gains increase equity. This influences whether traders can hold positions, add to trades, or must reduce risk.
MtM also plays a key role in margin control. If losses shown by MtM become too large, margin levels fall. This can lead to margin calls or forced trade closures if limits are breached.
MtM losses stay within planned risk limit
Margin levels remain stable
Price behavior matches the trade idea
MtM losses grow faster than expected
Margin drops close to minimum requirements
Trades remain open without a clear exit plan
Before placing a trade, traders should understand how MtM will affect their account.
Check how unrealized profit and loss are displayed on the platform
Confirm whether MtM updates in real time or at the end of the day
Review margin requirements linked to MtM changes
Observe how volatile the asset usually is
Start with smaller position sizes to see how MtM responds
Monitoring MtM regularly helps traders avoid unexpected margin pressure and poor timing decisions.
Ignoring unrealized losses: Floating losses still reduce account equity
Reacting to every small MtM move: Normal fluctuations can cause overtrading
Confusing MtM with final profit: Final results depend on exit price
Misjudging margin impact: MtM losses affect margin immediately
Holding losing trades too long: Watching MtM without acting increases risk
Risk management: The process of controlling losses and exposure, with MtM showing real-time risk.
Market liquidity: How easily assets trade, which affects how quickly MtM values change.
Forex broker: A financial firm that provides access to currency markets and applies market to market pricing to show real-time profits, losses, and margin levels.
Accumulation: The gradual building of a position over time, where market to market updates continuously reflect changes in value as prices move.
Accrued interest: Interest that builds up over time on certain financial instruments and is included in market to market valuations when positions are revalued.
Market order: An order to buy or sell immediately at the current market price, which becomes the starting point for market to market valuation once the trade is open.
Value At Risk: A way to estimate how much money could be lost on a trade or a portfolio over a set period of time.
No. Market To Market updates the value of an open trade using the current market price, but the position remains open. The profit or loss shown is unrealized and can still change until the trade is closed.
Yes, Market To Market is used for most trading products where prices move continuously, especially leveraged and derivative instruments. While the timing may differ, the goal is always the same, to reflect the true current value of open positions.
Yes. Because MtM updates with every price change, a position showing a loss can move back into profit if the market reverses. However, the loss still affects margin and available funds while the trade remains open.
Brokers rely on Market To Market to measure real-time risk. If current prices move against a trade, MtM losses reduce account equity, which directly lowers available margin.
Beginners should use MtM to understand how price changes affect their account before trades are closed. The focus should be on whether MtM losses stay within planned risk limits, not on reacting to every small price movement.
Market To Market is the practice of valuing open positions using current market prices instead of historical costs. It shows real-time profits and losses and plays a central role in margin and risk control.
When understood and monitored correctly, MtM helps traders stay aware of their true exposure. When ignored, it can lead to unexpected losses and forced trade closures.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
