Balance vs. Equity - Closing accounts prematurely

I have included, in previous posts, about a dozen links to the standard print off that our auto trader gives when it completes a backtest. Included with that report is a graph showing the movement of the results daily balance. I want to take a moment and make sure everyone understands how to read the graph. While the graph for the most part is very straightforward, there are a couple aspects worth noting including the balance line vs equity line. So here is a basic run down of how to read and understand the graph.

(Click on the image to enlarge it)
Attached is a graph representing the balance changes of the GBP/JPY Daily extension strategy from December 6, 2007 - April 6, 2008. The numbers on the right represent the overall balance, the numbers on the bottom represent the trade transaction number. You can find the actual trade numbers on the report list and use that number to match up the date. There are two lines, the blue balance line, and the green equity line. I really wanted to write this post so that I could point out that green equity line. If we decide to implement this strategy into the overall system, we will have times when our balance is higher than our equity. What that means, is that we have trades open that are in the red that if closed, would shrink our balance to the equity figure. Our current strategy does not have trades open overnight and so this really has not been a factor. If we choose to add this strategy, we all need to understand that there will be times when we have losing trades open for weeks. If someone chooses to close their account, that losing trade would be closed prematurely and the balance would shrink to that equity number.

For comparison sake, here is a graph of our Intraday strategy that does NOT carry positions overnight. Notice no green equity line.