By Fajar Febriansyah · Updated September 2026 · Firm rules checked July 2026
In one line: Equity based drawdown ties your loss limit to account equity instead of account balance, so open positions count. Two different rules carry that name. One checks live equity against the floor, which is how a floating loss can end the account mid-trade. The other builds the floor from your peak equity, which is how floating profit quietly shrinks your buffer. Some firms run both at once.
Also called equity drawdown, floating drawdown, or real time drawdown.
Table of Contents
- Equity vs balance, the underlying difference
- The two rules called equity based drawdown
- Four questions that pin down any drawdown rule
- Trigger side: a floating loss ends the account
- Anchor side: floating profit lifts the floor
- Equity based vs balance based
- Which prop firms use it
- How to trade under the rule
- What counts as a breach
- Related glossary terms
- FAQs
Equity vs Balance, the Underlying Difference
There are two ways to describe how much money is in a trading account, and they only agree when you have nothing open.
Your account balance is the total from closed trades. Win or lose, it only changes when a position is settled. Your equity is the balance plus the running profit or loss of everything currently open. Go 400 dollars underwater on a live trade and your equity is 400 dollars lower right now. Your balance has not moved.
Every drawdown rule references one of those two numbers, and that single choice decides how much room you really have. For the underlying finance concept rather than the prop firm version, see the general definition of drawdown, and BabyPips has a plain walkthrough of balance versus equity on a live account.
The Two Rules Called Equity Based Drawdown
This is where most traders get caught, and most explanations stop short. The phrase is used for two mechanics that behave nothing alike. Read a firm's rule page carefully and you will usually find one, sometimes both, and almost never a label telling you which.
A trigger side rule punishes you for holding a loser. An anchor side rule punishes you for holding a winner that reverses. Those need opposite habits, which is why traders who pass at one firm fail at the next on what looks like an identical percentage.
The two also stack. A firm can set the floor from peak equity and enforce it against live equity, which is the strictest combination available and the one most futures-style intraday accounts use. An end of day variant of the same anchor is considerably kinder, because intraday peaks are never recorded.
Four Questions That Pin Down Any Drawdown Rule
Rather than trying to sort firms into two buckets, ask these four questions about the specific account you are buying. The answers fully describe any drawdown rule in the industry, and the phrase "equity based" answers at most one of them.
| Question | Possible answers | Why it matters |
|---|---|---|
| 1. What sets the threshold? | Initial balance, midnight balance, closed balance, or a high-water mark | Decides whether your profits move the floor at all |
| 2. What value is observed against it? | Closed balance, or live equity including floating P&L | Decides whether an open loser can breach you |
| 3. How often does the threshold update? | Never (static), at session close (EOD), or continuously (intraday) | Decides whether an intraday spike is remembered |
| 4. What happens on a crossing? | Instant closure, position liquidation, a reduced profit split, or a soft warning | Decides whether one bad tick is recoverable |
Get all four in writing and you know exactly how much room you have. Two firms can both say "8 percent equity based" and give you a completely different account.
Trigger Side: How a Floating Loss Ends the Account
100,000 account, 10 percent maximum loss, fixed floor at 90,000
You are long gold. Balance reads 100,000 because nothing has been closed today.
A data release hits and gold drops. Your open position goes 8,000 dollars underwater. Equity is now 92,000. You still have 2,000 dollars of room and no reason to panic, but the buffer is thinner than the balance figure suggests.
The spread widens and price moves again. Floating loss reaches 10,100 dollars. Equity touches 89,900. The floor is 90,000. The account closes automatically and the position is liquidated at market.
Your balance never changed. You never pressed a button. The rule did all the work.
Anchor Side: How Floating Profit Lifts the Floor
Every guide on this subject warns you about floating losses. Very few mention that on an anchor side rule your floating profit is the thing working against you.
100,000 account, 5,000 daily limit, floor set from the higher of balance or peak equity
| Moment | Equity | Anchor | Floor | Room left |
|---|---|---|---|---|
| Session opens | 100,000 | 100,000 | 95,000 | 5,000 |
| Trade floats to +3,000 | 103,000 | 103,000 | 98,000 | 5,000 |
| Trade gives it all back | 100,000 | 103,000 | 98,000 | 2,000 |
| Next trade loses 2,100 | 97,900 | 103,000 | 98,000 | Breached |
Look at row three. You are back at your opening equity, flat for the day, and you have lost 3,000 dollars of usable buffer. The anchor only moves up. Nothing you do brings it back down inside that session.
This is why "let winners run" is bad advice on anchor side accounts unless you take partials. An unrealised gain you fail to bank is not neutral. It is a permanent reduction in the room you have left. The same mechanic sits behind trailing drawdown at the account level, where the effect compounds over weeks rather than resetting daily.
Equity Based vs Balance Based Drawdown
Take one trade and run it through both. A 100,000 dollar account, an 8 percent maximum loss, so a floor at 92,000. You open a position, it goes 9,000 dollars against you, then it turns around and closes at break even.
| What happens | Equity observed | Balance observed |
|---|---|---|
| Trade opens | Equity 100,000. No issue. | Balance 100,000. No issue. |
| Floating loss hits 9,000 | Equity 91,000, below the 92,000 floor. Account breached and positions closed. | Balance still 100,000. The drawdown rule is not triggered. |
| Trade recovers to break even | Too late. The account was already gone. | Balance 100,000. Trader continues. |
Same trade, same percentage, opposite outcome. This is why swing traders and anyone who holds through pullbacks look for balance based accounts, while equity based accounts suit traders who exit fast and rarely sit in an unrealised loss. Exiting fast has a cost of its own if the firm also runs a consistency rule, since banking profit in concentrated bursts is what that rule penalises.
Which Prop Firms Use Equity Based Drawdown
Equity based enforcement is the industry default. Across the firm rule pages our team reads directly, purely balance based enforcement is the exception. The useful question is not whether a firm is equity based, it is which of the two mechanics applies and to which account type.
Maven Trading is a good demonstration because the answer changes inside the same firm. Rules below are from our review, data checked July 2026.
| Account | Mechanic | Which side |
|---|---|---|
| Maven Standard 1, 2 and 3-Step |
Daily limit anchored to the higher of equity or balance at 00:00 UTC, then applied end of day | Anchor side. Floating profit held at the daily reset sets a higher bar for the session. |
| Maven Instant Funding |
3 percent trailing from the highest equity mark, plus a separate 1 percent cap on floating loss at any moment | Both. The trail is anchor side, the 1 percent floating cap is trigger side. |
| Maven OMO and Buy Now Pay Later funded |
M2 Account Saver monitors open position drawdown live and fires at 2 percent combined floating loss | Trigger side, and the consequence is not closure. First trigger closes trades and cuts the profit split permanently. |
Note what the third row does to question four. A crossing there does not end the account, it halves your economics for the life of it. That is a materially different rule from an instant breach, and it is the kind of detail a drawdown percentage never tells you.
To compare drawdown mechanics across a wider set, use the comparison tool or browse the full firm directory. Individual review pages carry each firm's current numbers and the date they were verified.
How to Trade Under an Equity Based Rule
The adjustment is smaller than most traders expect, but it has to be deliberate. You are no longer managing your closed results. You are managing the worst point your open trade is allowed to reach, and on anchor side accounts, the best point too.
What Counts as a Breach and What Does Not
On a trigger side rule, a breach is a single moment, not a daily total. If equity touches the floor for one tick, the account is gone. It does not matter that price recovered a second later or that you finished the day in profit. Most firms do not appeal these.
What does not breach the rule is a large floating loss that stays above the floor. Sitting 5,000 dollars underwater on a 10,000 dollar buffer is uncomfortable but legal. The rule cares about the level, not your comfort, and it does not care about your reasoning either. There is no manual review, no warning message and no grace period. The check is automated and runs constantly.
The consequence is also worth checking rather than assuming. Most firms close the account, but some cut the profit split or void the evaluation without touching a funded account behind it.
Nor does a raised anchor count as a breach on its own. Floating profit lifting your floor is not a violation, it is just a smaller account than the one you had this morning. The violation arrives later, when a normal-sized loss meets a buffer that is no longer normal-sized.
FAQs About Equity Based Drawdown
What is equity based drawdown in a prop firm?
It is a drawdown rule tied to account equity rather than closed-trade balance. Equity is your balance plus or minus the profit and loss on anything still open, so it moves with every price tick. Firms use the label for two different mechanics: one where live equity is what gets checked against the floor, and one where peak equity is what sets the floor in the first place. Confirm which one applies to your account type before you trade.
Can I breach an equity based drawdown without closing a trade?
Yes, if the rule is enforced against live equity. A floating loss counts against the limit straight away, and if it is large enough to push equity below the floor the account fails and your positions are closed for you. There is no chance to wait for a recovery.
Does floating profit count against equity based drawdown?
On anchor side rules, yes, and this is the part traders miss. If the floor is set from the higher of balance or peak equity, an unrealised gain lifts the floor. Float to plus 3,000 on a 100,000 account with a 5,000 limit and the floor rises from 95,000 to 98,000. Give the profit back and your usable buffer is 2,000 instead of 5,000, on a trade that earned you nothing.
What is the difference between equity based and balance based drawdown?
Balance based rules reference closed trades, so a floating loss does not touch the limit until you exit. Equity based rules bring open positions into the calculation. Same percentage on paper, very different room in practice. Balance based does not mean you can hold a losing trade indefinitely, because margin close-out and any separate floating-loss cap still apply.
What four questions pin down any prop firm drawdown rule?
What sets the threshold, whether that is initial balance, midnight balance, closed balance or a high-water mark. What value gets observed against it, balance or live equity. How often the threshold updates, never, at session close, or continuously. And what happens on a crossing, whether the account closes instantly or something softer applies. The words "equity based" answer at most one of the four.
Is equity based drawdown the same as trailing drawdown?
No. Equity based versus balance based is about which account value the rule references. Trailing versus static is about whether the floor moves as you profit. An account can be equity based and static, or equity based and trailing, and those combinations trade very differently. A balance based limit can also trail.
How should I size positions under an equity based drawdown?
Size against your remaining buffer rather than your balance, and treat your worst case floating loss as the number that matters. Set a stop before entry so that figure is fixed, watch equity instead of balance while a trade is live, and reduce size before high impact releases and the weekend when spreads widen and gaps happen. On anchor side rules, take partials rather than letting an unrealised gain build and reverse.
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