Net Liquidation Value (Net Liq)
Net liquidation value, usually shown in a trading platform as "Net Liq," is the total dollar amount you would walk away with if every position in your account were closed right now and all cash balances settled. It is the single number that most honestly answers the question "what is my account actually worth at this instant?"
Your broker calculates it by adding up your cash, the current market value of every stock, option, or futures position you hold, and then subtracting anything you owe, such as margin debt (money borrowed from the broker to buy securities) or the cost to buy back a short position. The result updates continuously during market hours because it depends on live prices, so it moves tick by tick as the market moves, even if you have not placed a single trade.
The nuance that trips people up is that net liquidation value is not the same as cash balance, and it is not the same as buying power. Cash balance only reflects uninvested dollars sitting in the account. Buying power reflects how much you are allowed to trade given margin rules, which can be larger or smaller than your actual account worth. Net liq is the true, all-in snapshot: open positions marked at current market prices, plus cash, minus liabilities. It is also a theoretical figure in the sense that closing large or illiquid positions all at once might not fetch exactly the last quoted price, so the real number you would receive could differ slightly from what the screen shows.
Brokers rely heavily on net liquidation value behind the scenes, most importantly to determine whether an account is meeting margin requirements. If net liq falls below a required maintenance level, the broker can issue a margin call or begin liquidating positions automatically, regardless of what the trader intended to do.
This term depends on a rule or threshold that changes over time, so no specific figure is quoted here. The entry does not itself state a specific dollar threshold or percentage, so no number needs sourcing here. However, the related concept it feeds into (maintenance margin requirements that trigger margin calls) does involve specific percentages set by FINRA/exchanges and individual brokers, which change over time. If this glossary entry is ever expanded to cite a specific maintenance margin percentage, that figure must be confirmed against current FINRA rules and the broker's own margin policy, not assumed from training data.
Day traders watch net liq because it is the real-time scorecard of total risk and performance, and because brokers use it, not cash balance, to decide when to force-close positions during a margin shortfall.
A trader has $5,000 cash, holds a stock position currently worth $12,000 that was bought partly on margin, and owes the broker $8,000 in margin debt. Net liquidation value is $5,000 + $12,000 − $8,000 = $9,000. If the stock drops sharply and its market value falls to $8,000, net liq drops to $5,000, which may be enough to trigger a margin call even though the trader never touched the cash balance.
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