How is combined equity calculated for a margin account?

The calculation of combined equity for a margin account indeed involves determining the equity of each position individually and then summing them up. For each position, equity is calculated by taking into account the market value of the asset, subtracting any debits associated with it (in the case of a long position) or adding credits (for short positions).

By calculating the equity for each position separately, you take into consideration the specific debts or credits related to those holdings. Once you have the equity values for each position, summing them gives you the total combined equity in the margin account. This overall figure is crucial for understanding the investor's net worth in the context of their margin trading activities, ensuring proper assessment of risk and available capital for further trading.

This method contrasts with other approaches like simply adding market values or subtracting balances from total investments, which may not fully account for the nuances of each position's performance and the associated margin impacts.