Equity vs balance drawdown: what your prop firm actually measures

Your MT5 history shows a small loss for the day. Your prop firm dashboard shows a breach. In most cases both numbers are correct. They just measure different things.

This guide explains balance and equity, how firms combine them in daily loss and max drawdown rules, and how to keep a safety margin that holds up.

Balance and equity in one minute

• Balance: the account value from closed trades only. It changes when a position is closed.
• Equity: balance plus the profit or loss of all open positions, minus swaps and commissions. It changes with every tick while a trade is open.
• With no open positions, balance and equity are the same. The difference only exists while you are in a trade, which is exactly when the limit is tested.

Every drawdown rule has two parts

1. The reference: the value the limit is measured from (start-of-day balance, initial capital, highest balance, or the higher of balance and equity).
2. The test: the value compared against the limit, usually equity, open trades included.

Most confusion comes from mixing these two up. "Balance-based" usually describes the reference, not the test.

Daily loss: three common setups

• Balance reference, equity test. Example from FTMO's official trading objectives (as of November 2026): the daily limit is the balance recorded at 00:00 CE(S)T minus the allowed daily loss; the account breaches if equity (balance plus open P/L, swaps and commissions) falls below that level. On the first day the reference is the initial capital.
• Higher of balance or equity. Some rules take whichever is higher at the reset. If you carry open profit through the reset, the reference moves up with it, so the same dip the next day leaves you less room.
• Equity everywhere. A few rules set the reference from equity as well. Then open profit at the reset immediately raises your floor.

Always read your own program's wording. Rules differ between firms and between programs of the same firm.

Max drawdown: static, end-of-day trailing, intraday trailing

• Static: a fixed line below the initial capital. It never moves.
• End-of-day trailing: the line follows the highest balance recorded at the daily reset and never moves down.
• Intraday trailing on closed balance: the line moves up the moment a trade closes at a new balance high.

FTMO, for example, uses all three depending on the program (2-Step static, 1-Step end-of-day trailing, Instant intraday trailing, as of November 2026). Your account type decides which line you trade against.

A worked example

Start-of-day balance: 100,000. Allowed daily loss: 5,000. The limit is 95,000.

You close two trades for −800. Balance: 99,200. Your history says −0.8%.

You still hold a position that is −4,300 open. Equity: 94,900. That is below 95,000, so the account has breached, even though the closed loss was under 1%.

Illustrative numbers, not a firm's actual parameters.

How to stay inside the line

• Watch equity, not closed P&L, while positions are open.
• Set a personal daily stop well inside the firm's limit (for example at 50 to 80% of it) and stop for the day when you hit it.
• Know the reset time in your own timezone, including daylight-saving changes.
• Count spreads, swaps and commissions as part of your risk; they hit equity too.
• Decide what happens to open trades before the reset if your rule uses the higher of balance or equity.
• Use a hard lock that closes positions and blocks new trades at your own limit, so the decision is made before the stressful moment. The PropBlaster Guard and the free Daily Loss Guard EA do this on MT5. No tool can close positions while the market is closed, so gaps can still go past any buffer.

Questions

Is the daily drawdown based on balance or equity?

Usually both: the limit is set from a reference (often start-of-day balance) and tested against equity, which includes open trades. Check your program's exact wording.

Do open trades count toward the daily loss limit?

In most rules, yes. Floating losses, swaps and commissions reduce equity, and equity is what is compared against the limit.

Why does my MT5 history show a smaller loss than my prop firm dashboard?

The history shows closed trades (balance). The firm tracks the lowest equity during the day, including open positions.

What is the difference between static and trailing drawdown?

A static limit stays at a fixed level below the initial capital. A trailing limit moves up with your highest balance (at day end or intraday) and never moves down.

Can an EA protect me from a breach?

A guard EA can close positions and block new trades at your own limit, which helps a lot. It cannot act while the market is closed, so a gap can still exceed the buffer.

Related: Daily drawdown rules explained · Equity vs balance drawdown · Copy trading rules · Trading journal for prop firms · Daily loss limit EA