In this guide
Balance, equity and floating P/L: three different views
Balance is the account's booked balance: deposits and withdrawals, realised trading results and charges already posted to it. It does not normally include the changing profit or loss of positions that remain open. Closing a trade transfers its result into balance; a deposit can also raise balance without earning any trading profit.
Equity is the account's current value under the broker's calculation, including open positions. Floating P/L is their unrealised profit or loss at current valuation prices. In the simple, credit-free examples here: equity = balance + net floating P/L. We use US dollars and assume all relevant costs are included consistently, with no deposits or withdrawals unless stated.
On a real terminal, credit, swaps, commissions and other adjustments may appear in separate fields or be booked at different times. MetaQuotes notes that equity calculation depends on server settings. Reconcile the broker's fields before applying the shortcut; do not subtract a commission twice. Equity is a current valuation, not a promise of the amount a future exit will realise.
What the gap between the curves tells you
With balance of $10,000 and net open losses of $2,000, equity is $8,000. Balance has not fallen, but the account has already lost $2,000 of current value. If the net open result is a $600 profit, equity is $10,600. A flat balance therefore says little about what is happening inside open trades.
When balance and equity share the same currency, scale and timestamp, their signed gap represents the net open result plus any separate adjustments. Equity below balance signals a net floating loss; equity above it signals a net floating profit in our simplified account. A persistent or widening negative gap deserves attention. On differently scaled axes, the visual distance alone is meaningless.
Netting can conceal concentration: one open position at +$1,500 and another at −$2,000 produce only −$500 net floating P/L. A small gap does not prove that each trade is low risk. Inspect gross exposure, directions, correlations and individual positions as well. Pending orders are not open positions yet, but can change exposure when triggered.
Follow a $10,000 account through a complete episode
The seven observations below are fictional teaching data, not a robot's backtest or live performance. Choose a stage to compare the booked balance with the value including open trades. The percentages use each series' own previous peak; all costs are assumed included and there are no cash flows.
Stage 0–6 · Account value · USD
No open result: balance and equity are both $10,000.
Read the upper chart in dollars and the lower chart in percent. Stage numbers are observation order, not equal trading intervals. Lines join known observations; no intraday path is inferred.
| Stage | Balance | Floating P/L | Equity | Balance DD | Equity DD |
|---|---|---|---|---|---|
| 0 · Initial peak | $10,000 | $0 | $10,000 | 0% | 0% |
| 1 · Open loss grows | $10,000 | −$800 | $9,200 | 0% | 8% |
| 2 · Equity trough | $10,000 | −$2,000 | $8,000 | 0% | 20% |
| 3 · Loss is closed | $8,000 | $0 | $8,000 | 20% | 20% |
| 4 · Open profit | $8,000 | $600 | $8,600 | 20% | 14% |
| 5 · Old peak regained | $10,000 | $0 | $10,000 | 0% | 0% |
| 6 · New historical high | $10,500 | $0 | $10,500 | 0% | 0% |
At stage 2, balance drawdown is 0% while equity drawdown is 20%. At stage 3, closing the same losing position at the same price moves balance to $8,000 and floating P/L to zero. Equity stays at $8,000: the close recognises the existing loss rather than creating a second $2,000 loss. Additional execution costs or a different exit price would change that result.
At stage 4, equity improves to $8,600 while balance is still $8,000. At stage 5, both reach the old $10,000 peak: current drawdown is zero, but historical maximum equity drawdown remains 20%. Stage 6 establishes a new high of $10,500. The recovery shown is one possible path; an actual account may recover partially, take much longer or never recover.
Drawdown starts at a previous peak
For a positive account-value series V, let H be the highest value observed up to that moment. Current drawdown in money is H − V; current drawdown in percent is 100 × (H − V) / H. H is a running historical peak, not necessarily the initial deposit or today's balance. A new high resets the current drawdown to zero and raises the benchmark for the next episode.
An account can be profitable since inception and still be in drawdown. If it starts at $10,000, grows to $12,000 and then falls to $10,800, it remains $800 above its starting value but is $1,200, or 10%, below its peak. Comparing only with the starting deposit misses that decline.
Use one defined series throughout. Balance drawdown compares balance with previous balance peaks. Equity drawdown compares equity with previous equity peaks, which can include unrealised profits. A retreat from a large open profit can therefore produce equity drawdown even before the position becomes a net loser. Neither percentage can be substituted for the other.
Floating drawdown is economic exposure
Floating loss has not yet been booked as a closed-trade loss. It can shrink, disappear or deepen as prices and costs change. Nevertheless, it already reduces equity and usually the margin available to sustain positions. Calling it temporary describes its accounting status, not its safety or its likelihood of recovery. Broker stop-out can realise the loss before the trader's expected reversal arrives.
Be precise with the phrase floating drawdown. It sometimes means net open loss divided by current balance; elsewhere it means peak-to-trough equity decline. Suppose balance is $11,000, equity is $10,000 and the earlier equity peak was $12,000. Open loss is $1,000, or 9.09% of balance. Current equity drawdown from the peak is $2,000, or 16.67%. These answer different questions.
Closing only profitable trades can make balance look steadily rising while losing positions accumulate underneath. Closing a loser makes that loss visible in balance, but does not remove an additional amount from equity if price and costs are unchanged. Conversely, recovery in an equity curve can occur while profits remain open; balance recovery requires booked results. Always identify which recovery is being reported.
Absolute, relative and maximum drawdown
Absolute drawdown usually asks how far the chosen series fell below the initial deposit: max(0, initial value − lowest observed value). It is not the same as the largest loss from a later peak. Relative drawdown expresses a peak-to-trough fall as a percentage of that peak. Maximum drawdown is the worst such decline observed in a specified period, with the series and units stated.
Platform labels require care. MT4 tester reports distinguish Maximal drawdown in account currency, with its paired percentage, from Relative drawdown, the largest percentage decline with its paired amount. The worst money episode and the worst percentage episode need not coincide. A field called Max DD elsewhere may primarily report a percentage. Check the report's own definition and whether it uses balance, equity or adjusted returns.
Consider the observed sequence $10,000 → $9,500 → $12,000 → $10,000 → $20,000 → $17,000 → $20,000. Absolute drawdown is only $500. Maximum money drawdown is $3,000, paired with 15%. Maximum relative drawdown is 16.67%, paired with $2,000. The same history can therefore correctly produce three different figures.
| Peak → later trough | Decline in USD | Decline from peak |
|---|---|---|
| First decline $10,000 → $9,500 | $500 | 5% |
| Largest percentage decline $12,000 → $10,000 | $2,000 | 16.67% |
| Largest money decline $20,000 → $17,000 | $3,000 | 15% |
Current DD and historical maximum answer different questions
Current drawdown measures the gap below the relevant peak now. Historical maximum drawdown records the deepest observed episode across the stated history. After full recovery, current DD can be 0% while historical maximum DD stays at 20%. Within the same expanding history, a new worse episode can increase the maximum; a good month does not erase it.
Filtering a chart to a recent period, resetting an account or changing the calculation basis can show a smaller maximum because the sample changed. Check whether the peak before the selected period is retained. A maximum measured over three months is not directly comparable with one measured over five years containing different market conditions, deposits, position sizes and strategy settings.
Historical DD is an observed result, not a future loss limit. The next decline can be deeper. Updates also sample the account: a short-lived intraday trough between updates may be absent from a daily chart or an incomplete history. A smooth curve and a small reported maximum cannot prove that no larger open loss occurred between observations.
Read the underwater period, not just the low point
A drawdown episode has a prior peak, a descent, a trough and possibly a recovery. Some charts plot account value, others plot drawdown as a positive depth or a negative underwater percentage. Confirm the sign and axis. A zero on a drawdown chart means that the chosen series is at its peak; it does not necessarily mean no open trades or no trading risk.
Define the clocks explicitly. Peak-to-trough time measures the descent. Trough-to-recovery time measures the rebound from the episode's lowest value. Total time under water is commonly measured from the prior peak to the first observation that reaches or exceeds that peak. Some providers call that whole interval recovery period; others use only the rebound. State which one you mean and whether time is calendar days, trading days or trades.
In the next example both accounts start at $10,000 and have an observed maximum equity DD of 20%. Account A reaches its trough on day 10 and regains the peak on day 30. Account B reaches its trough on day 5 and regains the peak on day 210. Equal depth masks very different capital commitment, open exposure and waiting time. Duration alone still does not identify the cause or guarantee which strategy is better.
Elapsed calendar days · Account value · USD
Calendar days from the initial peak; plotted points are illustrative observations. A: 10 days down, 20 days back, 30 days total. B: 5 days down, 205 days back, 210 days total.
| Profile | Peak → trough · days | Trough → recovery · days | Peak → recovery · days |
|---|---|---|---|
| Account A | 10 | 20 | 30 |
| Account B | 5 | 205 | 210 |
What counts as recovery?
For an episode whose previous peak is $10,000, the first subsequent observation at $10,000 or above marks recovery on that same series and accounting basis. Reaching $9,900 is partial recovery. Reaching exactly $10,000 regains the old high; moving above it establishes a new historical high, unless a still higher earlier peak is being excluded by a filter.
A later fall begins another drawdown. One recovered observation does not establish lasting stability. If the test or monitoring window ends before the peak is regained, report not yet recovered and the elapsed underwater time so far. Do not assign a zero recovery period or calculate an average using only recovered episodes without disclosing the unfinished ones.
Daily observations locate recovery only to the available sampling interval. Equity may have crossed the peak intraday and fallen back before the next update. Likewise, a closed-trade-only series cannot reveal how long equity spent below its peak between exits. Recovery analysis is only as precise as the data supporting it.
Why −10% is not repaired by +10%
The percentage base changes after a loss. Starting with $10,000, a 10% loss leaves $9,000. A subsequent 10% gain is only $900, so the account reaches $9,900. It still needs $100. To return directly from $9,000 to $10,000 requires $1,000 / $9,000 = 11.11% of the remaining capital.
For a loss L expressed in percent, the required recovery gain is 100 × L / (100 − L). Equivalently, for decimal loss d, it is d / (1 − d). The target is the previous capital level; there are no added funds or withdrawals, and the gain is net of costs. This is arithmetic, not an estimate of expected returns or the time needed to earn them.
A 20% loss needs 25% recovery; a 50% loss needs 100%. The curve becomes increasingly steep as the loss approaches 100%. At zero capital there is no finite percentage gain that restores the account from its own remaining funds. These formulas assume positive remaining capital; negative equity and a loss above 100% require a different analysis.
| Loss from peak | Remaining capital | Amount to regain | Required net gain |
|---|---|---|---|
| 5% | $9,500 | $500 | 5.26% |
| 10% | $9,000 | $1,000 | 11.11% |
| 20% | $8,000 | $2,000 | 25% |
| 30% | $7,000 | $3,000 | 42.86% |
| 50% | $5,000 | $5,000 | 100% |
Calculate the return needed from the remaining capital
Change the peak capital and loss percentage below. The tool shows the remaining value, the money shortfall and the percentage gain needed to regain that same peak. Increasing the starting amount changes the dollar figures, but the recovery percentage for a given loss stays the same.
Recovery calculator
Enter positive capital and a loss from 0% to less than 100%.
- Remaining capital
- $8,000
- Amount to regain
- $2,000
- Required net gain
- 25%
Default example: $10,000 less 20% leaves $8,000. Regaining $2,000 requires a 25% net gain.
The result does not specify a safe position size, a suitable robot or an achievable monthly target. Recovering quickly by increasing exposure can also deepen the drawdown. The calculator assumes one net loss, positive remaining capital and no external cash flows; future transaction costs must be earned as well if they are not already included in the net return.
A deposit can restore the number without recovering the loss
Suppose equity falls from $10,000 to $8,000 and the owner deposits $2,000. The raw account value returns to $10,000, but trading has still lost $2,000. The new money repairs the displayed funding level; it is not a trading recovery. Similarly, a withdrawal can reduce raw account value without representing a losing trade.
With cash flows, inspect a cash-flow-adjusted performance or return series and the provider's method. Time-weighted returns neutralise external flows by linking returns between them; a raw balance chart does not do that automatically. Do not compare an adjusted return peak with an unadjusted dollar trough. Funding, withdrawals and trading results should be distinguishable before interpreting DD or a new high.
Recovery also happens with a smaller capital base. After a loss, keeping the same nominal position increases exposure relative to remaining equity. Reducing position size can restore the previous proportional exposure but changes the dollar earnings of subsequent trades. Adding capital, cutting size and accepting a longer recovery are different actions; none makes the strategy's underlying loss disappear.
The same DD percentage can conceal different risk
Two accounts can each show historical maximum DD of 20% and current equity of $8,000, yet hold very different positions. Account A has $40,000 of exposure and account B has $160,000. In a simplified linear example, a further 1% adverse move costs $400 versus $1,600: 5% versus 20% of current equity. This assumes comparable instruments, one directional exposure and no offsets or additional costs.
Their effective exposure is 5 times versus 20 times equity, regardless of the broker's maximum leverage setting. Correlated positions can lose together; opposite positions may still incur spreads, swaps and imperfect hedging. Look at position sizes, concentration, stop rules, gaps and whether the strategy increases size after losses. A historical percentage cannot describe the whole present risk structure.
Margin adds another constraint. If a simplified $100,000 position requires $3,333.33 margin, equity of $10,000 leaves $6,666.67 free margin and a margin level of 300%. With equity at $8,000 and required margin unchanged, free margin becomes $4,666.67 and margin level 240%. Actual margin and stop-out rules depend on the broker and instruments. Margin is collateral, not the maximum possible loss.
Read our strategy charts and robot monitoring in order
Use the following sequence when examining a MyProfitFactor strategy, a historical robot test or the full linked public monitoring profile. A summary tile is an entry point; open the underlying report before drawing conclusions.
Identify the evidence and its date
Separate real-account monitoring, demo results and historical simulation. Check the test window, account start date, latest update and whether open trades are visible. A stale snapshot cannot describe current exposure.
Identify the series and axes
Is the curve balance, equity, cumulative closed profit or adjusted percentage growth? Dollars, percent and trade counts are different units. Check whether the horizontal axis is time or closed trades and whether deposits are included.
Compare balance with equity
Inspect their gap at the same timestamp, its persistence and the open positions behind it. A high closed profit does not cancel a large floating loss. A zero net gap can still conceal offsetting positions and substantial gross exposure.
Read the DD definition before its number
Check balance versus equity, money versus percent, current versus maximum, the peak reference and the sampling interval. Do not assume two services calculate a field called drawdown identically.
Trace depth and duration together
Find the prior peak, trough and first recovery. Record the underwater period and unfinished episodes. Compare histories of similar length and market coverage rather than one isolated percentage.
Check how the recovery occurred
Was the prior high regained by net trading returns, a deposit, larger positions or still-open profit? Distinguish recovery of balance from recovery of equity, then check whether a genuine new high followed on the same basis.
Inspect exposure and available margin
Read lots or notional exposure relative to equity, correlated instruments, size changes, loss limits and free margin. Averaging down or adding positions can increase the funds needed to survive another adverse move.
Form a conclusion from the combined evidence
Consider return, DD depth, time under water, open losses, leverage, costs and evidence quality together. Profit factor and win rate often concern closed trades; they do not replace equity history or establish a future risk ceiling.
What a report or provider may leave out
Our live robot summaries display figures supplied by FX Blue; they are not an independent reconstruction of every intraday equity value. Open the full public profile to examine the available balance, equity, open positions and update time. In historical reports, read the graph legend: green lot-size bars are position sizes, not an equity curve.
A graph reconstructed only from account balances after closed trades does not contain a separate equity series. Closed trades cannot reveal the lowest equity while positions were open, so that graph alone cannot establish equity drawdown or its recovery duration. A smooth balance reconstruction must not be read as proof of smooth account equity.
Provider definitions also differ. FX Blue's Account Monitor guide defines its Drawdown % alert using current floating P/L divided by balance; that alert is not a universal definition for every FX Blue statistic. Myfxbook documents that its headline DD takes the highest of end-of-day, intraday and growth measures, while its DD chart uses only end-of-day and growth measures. A headline can therefore exceed what that chart visibly shows.
Three conclusions worth checking before trusting a curve
Balance is up 10%. Is the account necessarily up 10%?
No. Starting from $10,000, balance of $11,000 with −$2,000 floating P/L gives equity of $9,000. With no cash flows or separate adjustments, booked results are positive but current account value is 10% below the start. The earlier peak is still needed to calculate current peak-based DD.
The maximum DD is only 10%. Is 10% the most I can lose?
No. It is the largest decline captured in that history under that calculation. Different exposure, a new market regime, execution gaps or missing intraday observations can produce a larger loss. It is neither a guarantee nor a contractual loss limit.
Equity has returned to its peak. Can the DD record be ignored?
No. Current DD is zero at that observation, but the previous maximum and the time under water remain part of the strategy's record. Check how recovery was achieved and whether current exposure has changed. A new high is another observation, not a guarantee against the next drawdown.
Risk and scope of the examples
This guide is educational, not a recommendation to use a robot, increase leverage or hold a losing position. All teaching paths and calculator results are illustrative and exclude cash flows unless stated. Live results and backtests do not guarantee recovery or future returns. Leveraged trading can cause rapid losses; the relevant account protections, margin rules and possibility of losses beyond deposited capital depend on the product, broker and jurisdiction.
Definitions and source notes
Five primary references, checked on 2 October 2026. Our numerical examples are independently calculated; platform labels should be read in their specific report context.