Drawdown and risk limits
Balance-based drawdown
A drawdown measured against closed balance rather than live equity. Floating losses on open positions do not move the breach level; only realised results do, once a trade is closed.
GFN’s figure
GFN monitors account equity, not just closed balance: floating losses on open positions count toward both the daily loss limit and the maximum drawdown on every programme.
- Floating losses
- Count toward the limits
- Closed losses
- Count within the daily calculation period
- Trading costs
- Commission, spread and slippage reduce the buffer
In detail
Balance-based drawdown,explained
Balance-based measurement is the looser of the two, because an open position can sit well underwater without registering. It is also the more dangerous to rely on, since a trader can be far past the limit on paper and only discover it at the moment the trade closes.
Most prop firms measure at least one of their limits on equity precisely to avoid that, so read which basis applies to each rule rather than assuming one covers both.
Related
Terms thatcome with it
Most rules only make sense next to the ones they interact with. These are the entries this one depends on.
Equity-based drawdown
A drawdown measured against live account equity, which includes the unrealised profit and loss of every open position. The breach level can be touched while a trade is still running, before anything is closed.
Maximum drawdown
The total loss an account may take before it is failed. Expressed as a percentage of the starting balance, it sets a floor: touch it and the account breaches, whatever the account has made up to that point.
Daily loss limit
The most an account may lose in one trading day before it breaches. Calculated as a percentage of the previous day's closing level, it resets at a fixed time each day and is the rule that ends most evaluations.
High-water mark
The highest level an account has ever reached. On a trailing drawdown it is the reference point the floor is measured down from, so every new high permanently moves the breach level upward.
Also governed by /rules/max-drawdown
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