DEFINITION

Equity

The current value of a trading account including open position P&L. Differs from balance, which only reflects closed trades. Some prop firms calculate drawdown from equity; others from balance.

Related terms

Drawdown

The peak-to-trough decline in equity, expressed as a percentage or dollar amount. Used to measure risk exposure and as the main failure criterion in prop firm evaluations.

Daily Drawdown

The maximum percentage loss allowed in a single trading day. Calculated from the balance (or equity) at the start of the day. Breaching this limit at any point during the session fails the account immediately.

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