Starr

@Starr_gael

10 Tweets • 2023-07-25 •  See on

rattibha.com 

The difference between EQUITY BASED

DRAWDOWN and BALANCE BASED DRAWDOWN.

A .
I once lost a $20,000 live account due to my lack of
understanding of the firm being equity based and not
balanced based.

I'm taking my time to make this so other traders don't

fall victims too.
All I ask is that you kindly retweet the first tweet for
others.

Let's continue

• What is balance-based drawdown? Balance based

considers the balance in your trading account only not
equity-( equity is the total value of your account
including unrealized profits or losses at a particular
time.)

When you purchase a balance based $100,000

account with a daily drawdown of 5%, no matter the
unrealised profits or losses, the account INITIAL
BALANCE AT OPENING, has to be at -5% for you to
lose that account.
An example -

This is a $100,000 demo account with floating profits

of $1,220.

Even if this profit reverses from $1,220 to $300 after 2

days, it is not considered a drawdown .

The trader has to lose 5% of the initial $100,000

balance to lose the account.
• What is equity-based drawdown?
Equity-based drawdown as the name implies, works
with equity and not balance.

It considers your balance+profits at 12:00am as your

new balance.

Whatever your equity reads at 12:00am of a new day

is your new balance.

An example -

This is an account with floating profits of $1,300. If I

decide to hold this trade till the next day, at 12:00am
my new balance will read $101,300 whether the profits
are unrealised or not.

(Unrealised profits are profits you're yet to close)

This simply means if the profits should retrace from
$1300 to $500 after 12:00am, even though I'm still
supposed to be in profits, my account will read -$800
in drawdown.

Because my balance is based on my equity at

12:00am whether unrealised or not.

This is why I stick mainly to balance based prop firms

and I recommend you do too.

@Maventrading and a few others are daily balanced

based. You can check them out with the link on my
bio.

Feel free to drop questions if you have any, in the

comment section.
If you learnt from this, don't forget to like and retweet
for others.

Follow @Starr_gael for more insightful threads and

tweets.

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