Balance Drawdown vs Equity Drawdown: The Number That Decides Whether Your Account Survives

Two numbers can describe the same trading account, and they can differ by a factor of ten. Knowing which one you are looking at is the single most useful skill when reading a backtest.

Balance drawdown only moves when a trade is closed. Equity drawdown includes the floating profit or loss of every open position, every second. For a strategy that closes one trade at a time with a hard stop, the two are close. For anything that holds a basket of averaging positions, they live in different worlds.

Imagine a grid EA on gold. It opens a buy, price falls, it adds more buys every few dollars. On the chart of closed trades, nothing bad has happened yet — the balance curve is a smooth staircase going up, because every closed basket closed in profit. Balance DD: 5%.

Meanwhile the open basket is 10 positions deep in a falling market. The floating loss at the worst moment reached half the account. Equity DD: 50%. Same account, same period.

If the fall had gone a little further, there would be no more staircase — there would be a margin call. The balance curve would have looked perfect right up to the last day.

Marketplace statistics and most report screenshots default to balance-based figures, and a 5% drawdown sells better than a 50% one. This is usually not even deliberate deception — the tester report prints both, and it is human to quote the flattering line. The buyer's job is to ask for the other one.

1. For any EA that can hold more than one position in the same direction, treat balance DD as meaningless. Ask for maximal equity drawdown over the full test.

2. In the MT5 Strategy Tester report, compare "Balance Drawdown Maximal" with "Equity Drawdown Maximal" yourself. A large gap between them is the fingerprint of averaging.

3. On live signals, look at the floating-loss history, not only the growth curve.

We publish equity drawdown for our own systems, including the years they lose. A buyer who knows the true worst case keeps a product; a buyer who was shown 5% and lived through 50% leaves a one-star review and never comes back. The honest number is also the commercially smart one.

Our products and free utilities: https://www.mql5.com/en/users/app.develop.sk/seller