Equity-Based Drawdown
Definition
Equity-based drawdown includes both realized and unrealized (floating) profits and losses in the drawdown calculation. If your open positions are in the red, that floating loss counts against your drawdown in real-time.
Equity-based drawdown is the stricter of the two main drawdown methods. Your equity is your balance plus or minus the unrealized P&L of all open positions. If your $100,000 account has an open position at -$3,000, your equity is $97,000 and that counts toward your drawdown.
This method requires more disciplined trade management because you can't hold large losing positions without affecting your drawdown. It also means you need to account for normal price fluctuations — even if your trade is ultimately profitable, a temporary spike against you could breach your drawdown.
FTMO and most major prop firms use equity-based drawdown. The best practice is to set stop losses that never allow a single trade's floating loss to consume more than a small percentage of your remaining drawdown. PropJournal monitors your equity in real-time and alerts you when floating losses push you toward your limits.
Track equity-based drawdown automatically
PropJournal monitors your prop firm metrics in real-time and alerts you before violations. Free to start, no credit card required.
Try PropJournal Free