Why your drawdown is underestimated
Drawdown measures an account's largest fall from its peak. It is the figure that tells you how much you could have lost, and often the one that decides a prop firm account. Yet many dashboards show a value lower than reality. Here is why.
The balance does not see open positions
The balance only moves when a position is closed. While it is open, the floating loss only shows in the equity. A drawdown computed on the balance therefore ignores everything that happened between opening and closing.
Fictitious example: a €10,000 account opens a position that falls to −€1,500, then recovers and closes at −€200.
| Measure | Lowest value seen | Drawdown |
|---|---|---|
| Balance | €9,800 | 2% |
| Equity | €8,500 | 15% |
The risk actually taken is 15%, not 2%.
Spaced readings miss the low
Even when computed on equity, drawdown depends on how often equity is recorded. If equity is recorded every hour, a twenty-minute dip between two readings does not exist for the tool. The more spaced the readings, the more optimistic the drawdown shown.
Commissions and swaps count too
A commission charged at opening or a swap accumulated over several nights pushes equity down. A calculation that ignores them, or only adds them at closing, underestimates the low even more.
What Equidra does
Equidra replays the full history of each account with market prices, trade by trade, commissions and swaps included. The maximum drawdown found is dated, for each account and for the grouped portfolio, with the data quality shown next to each value.
Key points
- Look at the equity drawdown, not the balance drawdown.
- Ask how often equity is recorded.
- Check that commissions and swaps are included.
An exact drawdown does not make a strategy more profitable: it shows the risk as it was taken. To try Equidra on your accounts, see Pricing.