{"term":{"slug":"balance-based-drawdown","term":"Balance-Based Drawdown","definition":"A drawdown calculation method that only considers closed trade results, ignoring unrealized profits and losses from open positions. Your balance only changes when trades are closed.","extendedExplanation":"Balance-based drawdown is more forgiving for traders who use wider stops or swing trade. Since only closed trades count, a position can be deeply negative without triggering a drawdown violation as long as you do not close it.\n\nTopStep and Apex use balance-based daily loss limits. This gives traders more breathing room for intraday fluctuations. However, the overall max drawdown is typically still equity-based or has additional rules.\n\nThe distinction between equity-based and balance-based is most important for the daily loss limit. A trader with a balance-based daily limit can hold a losing trade overnight (if the firm allows overnight holding) and let it recover the next day without counting against the previous day's loss. This is not possible with equity-based limits.","exampleWithNumbers":"TopStep $100K with balance-based 2% daily loss limit ($2,000): you open a trade that drops $3,000 in floating loss. Balance-based limit is not breached because the trade is still open. You close a different trade for a $1,500 loss. Balance-based daily loss: $1,500 (under the $2,000 limit). If this were equity-based, total loss would be $4,500 -- immediately breached.","category":"drawdown","relatedTerms":["equity-based-drawdown","daily-loss-limit","drawdown-floor","overnight-holding"]},"_links":{"self":"https://runvigil.app/api/glossary/balance-based-drawdown","page":"https://runvigil.app/learn/balance-based-drawdown","allTerms":"https://runvigil.app/api/glossary","learn":"https://runvigil.app/learn"}}