Balance Drawdown vs Equity Drawdown in MT5

Drawdown is the decline from a previous peak to a subsequent trough. It measures how far an account falls from that peak; the drawdown may or may not be fully recovered by the end of the measured period.

During a normal Strategy Tester run, balance reflects realised trading results, while open floating P/L affects equity. Balance drawdown therefore measures peak-to-trough declines in account balance.

Equity is balance plus or minus the floating profit or loss of open positions. Equity drawdown measures peak-to-trough deterioration in account equity, incorporating floating P/L from open positions. It is therefore useful for revealing risk that a balance-only curve can hide.

When an EA holds a losing position, the loss shows in equity immediately but in balance only when the trade closes. If the trade later recovers, the balance may never record that loss at all, even though the account carried it.

Strategies that hold trades through adverse moves, add positions, or use wide or no stops can show a small balance drawdown and a much larger equity drawdown. Strategies with tight, consistent stops often show the two numbers closer together, although this is not guaranteed.

Margin calls and stop-outs depend on broker margin rules and account equity/margin level. Many prop firms also include floating P/L or equity when calculating daily or maximum loss limits, but rules vary by firm. Always check the specific firm's current rules.

Absolute drawdown is the decline below the initial account value. Maximal drawdown is the largest peak-to-trough decline measured in money. Relative drawdown is the largest peak-to-trough decline measured as a percentage.

The maximum monetary drawdown and the maximum percentage drawdown can occur at different points in the test; they are not necessarily the same drawdown event. Make sure you know which figure is being quoted. See the official MetaTrader 5 tester statistics documentation.

A very smooth balance curve is not proof of low risk. Always look for an equity curve or an equity drawdown figure alongside it. AXIFLARE publishes both for each system: for example, AURELIS shows a materially higher equity drawdown than balance drawdown, while ASTRA shows the two close together.

Profit Factor shows how gross profit compares with gross loss. In the MetaTrader 5 Strategy Tester, Recovery Factor is calculated as net profit divided by maximum balance drawdown in monetary terms. It should not be assumed to use equity drawdown.

That is another reason to examine Recovery Factor and equity drawdown together rather than treating Recovery Factor as a complete risk metric. For the other Strategy Tester statistics, see MT5 backtest metrics.

• Find both balance and equity drawdown in the report.
• Check whether drawdown is quoted as a percentage or currency amount.
• Compare equity drawdown with your own risk tolerance and any prop-firm limits.
• Look for an equity curve, not only a balance curve.
• Read drawdown together with Profit Factor, Recovery Factor and trade count.

Balance drawdown describes peak-to-trough deterioration in realised account balance, while equity drawdown also captures the effect of floating open-position P/L. Both should be reviewed together. For a full evaluation framework, see how to evaluate an XAUUSD EA, and please read our Risk Disclosure.