Drawdown

What does drawdown mean?

Drawdown tells you how far your account fell from an earlier high. It can be shown in dollars or as a percentage of that high.

Imagine your account reaches $108,000. After a fictional XAUUSD New York-session result, the account value is $104,000. The decline is $4,000:

$108,000 − $104,000 = $4,000

$4,000 ÷ $108,000 × 100 ≈ 3.7%

The 3.7% describes what happened between those two account values. It is not a suggested risk percentage or a prop-firm limit.

Are you checking balance or equity?

• Balance drawdown: uses results from trades that have already closed.
• Equity drawdown: can change while a trade is still open because open profit or loss affects equity.

If you have an open XAUUSD trade, your balance may look unchanged while your equity is moving. Write down which value you used before comparing two figures.

Does being in drawdown mean you breached a prop-firm rule?

No, not automatically. Performance drawdown describes an account decline. A daily drawdown limit or overall drawdown limit is a written program rule that sets an official floor.

The firm decides whether the rule uses balance, equity, open profit and loss, costs, a daily reset, or a moving floor. Different programs can use different methods. Your firm's current dashboard and rules decide whether the account is breached.

What should you check?

1. What was the earlier account high?
2. What is the later account value?
3. Are you measuring balance or equity?
4. What period are you reviewing?
5. Are you studying performance drawdown or checking an official firm limit?

If you are checking a firm rule, copy the official floor first. Then use the daily drawdown calculator guide to compare that floor with the account value named in the rule. Use the prop firm risk management guide when you need the wider process around position size, stop loss, and daily controls.