Balance Or Equity: The Breach You Never Took

A trader is 200 dollars from the daily limit on paper and holds one open position that is temporarily 400 down. Nothing has been closed. An hour later the trade recovers and finishes green. Whether that account survived the hour depends on one word in the rulebook.

Two Numbers, Not One

Balance is settled money. It only changes when a position closes. Equity is balance plus the running profit or loss of everything currently open, adjusted for swaps and commissions. With no open trades the two are identical. With a position running they can be far apart.

A drawdown rule has to pick one of those to measure. That choice decides whether an open position can end your account.

What Each Basis Does To You

Balance based

The limit is checked against settled money only. An open position moving against you does not count until you close it. You cannot be breached by an unrealised loss. That gives a trade room to work, which matters most if you hold through volatility or trade news. The trade-off is that you can be carrying a very large open loss while technically compliant, and closing it will register all at once.

Equity based

The limit is checked against equity, so every tick counts in real time. FTMO’s trading objectives describe its Maximum Loss as a static limit that account equity, meaning balance plus open position profit and loss, cannot drop below. The floor never moves, which is the forgiving part, and yet an open drawdown can still breach it intraday. The account can be closed on a loss you never realised. Details are in our FTMO review.

One Firm Can Use Both

This is the part that catches people who have already read a comparison. A firm sets more than one limit, and they do not have to share a basis. The maximum loss rule can be measured one way and the daily loss limit the other, at the same firm, on the same account.

Comparing two firms on the headline percentage without checking the basis of each limit is how traders end up surprised. It is the same failure as comparing drawdown percentages without checking whether the floor trails.

Four Checks Before You Buy

• Is the maximum loss limit measured on balance or on equity, in the rulebook rather than the sales page.
• Is the daily loss limit measured on the same basis, or a different one.
• Does the daily limit reset on a fixed clock, and in which timezone, since that decides when an open position stops being counted against today.
• Does the basis change between the evaluation and the funded account.

We are not publishing a table of which firms use which basis. Doing it properly means reading each firm’s current rules, and a stale table on this particular fact would get accounts closed. Check the firm’s own terms, then model it with our drawdown calculator, and see how we assess firms for what we verify.

Common Questions

What is the difference between balance and equity drawdown?

Balance drawdown measures settled money and ignores open positions. Equity drawdown measures balance plus the running profit and loss of open positions, so it changes tick by tick. With nothing open the two are the same number.

Can an open trade breach a prop firm drawdown limit?

Under an equity based limit, yes. An unrealised loss counts immediately, so a position that moves against you and later recovers can still close the account. Under a balance based limit it cannot, because nothing counts until the position is closed.

Which is better for traders?

Balance based is more forgiving and gives trades room to work. Equity based is stricter but often pairs with other terms that are looser. Neither is disqualifying on its own, and the basis matters more than a one or two percent difference in the limit itself.

Do the maximum loss and daily loss limits use the same basis?

Not always. A firm can measure one on balance and the other on equity. Check both separately rather than assuming the rulebook is consistent across its own limits.