{"term":{"slug":"equity-based-drawdown","term":"Equity-Based Drawdown","definition":"A drawdown calculation method that includes unrealized (open) trade profits and losses in the account value. Your equity fluctuates with every tick while positions are open, making this stricter than balance-based drawdown.","extendedExplanation":"Equity-based drawdown means the firm monitors your real-time account value including open positions. If you have a $5,000 floating loss and a $4,500 drawdown limit, you would breach the limit even though you have not closed the losing trade.\n\nThis method is used by FTMO for daily loss limits. It prevents traders from holding deep underwater positions hoping for a reversal. With equity-based rules, you cannot \"hide\" losses by keeping positions open.\n\nThe practical impact is that you need wider stop-losses or smaller position sizes compared to balance-based drawdown. A trade that temporarily goes against you by $3,000 before recovering to profit would be fine under balance-based rules but could breach an equity-based daily loss limit.","exampleWithNumbers":"FTMO $100K with equity-based 5% daily loss limit ($5,000): you open 2 lots of EUR/USD. The trade moves against you by 200 pips. Floating loss: $4,000. You also have a closed loss of $1,200 from earlier. Total equity-based loss: $5,200. Daily limit breached at $5,000 even though the open trade might recover.","category":"drawdown","relatedTerms":["balance-based-drawdown","daily-loss-limit","drawdown-floor","stop-loss","risk-per-trade"]},"_links":{"self":"https://runvigil.app/api/glossary/equity-based-drawdown","page":"https://runvigil.app/learn/equity-based-drawdown","allTerms":"https://runvigil.app/api/glossary","learn":"https://runvigil.app/learn"}}