Equity Drawdown
A drawdown calculated from real-time account equity — open positions and unrealized losses count toward the limit tick-by-tick.
Definition
Equity drawdown measures losses based on the account's live equity — closed-trade balance plus unrealized PnL on all open positions. If a trade moves against you, the loss counts immediately, even before the position is closed. Equity drawdown is the stricter of the two calculation methods because it leaves no room to hold losing positions and hope for recovery.
Example
Why It Matters
Equity drawdown punishes traders who hold losing positions, and it is a silent killer during periods of high spread — market open, major news events, and the daily rollover window. A trader who sizes positions assuming the spread will hold tight can see equity dip into breach territory during a widening event. Equity-based firms reward tight stop discipline and punish hope trades.