Testing & evaluation
Balance drawdown versus equity drawdown: read the right number
Balance changes when trading results and other account operations are booked. Equity also reflects the current floating result. A strategy can show a calm balance curve while open positions move sharply against it.
Name the metric precisely
When discussing drawdown, specify balance or equity and percentage or money. The largest percentage decline and largest money decline can occur at different points, especially when position size grows with the account.
Use a simple illustration
An account that grows from US$1,000 to US$2,000 and falls to US$1,600 has a 20% decline from that peak. A later US$1,000 drop from US$10,000 is only 10%. The larger money decline is not the larger percentage decline.
Check the plotted series
A line drawn from closed deals is not a continuous equity curve. Read what the chart represents and use the tester’s actual equity statistics when that is the question you are answering.
Read MQLume reviews with context
Our review articles pair return figures with the recorded maximum percentage equity drawdown and settings. Use those together to understand the historical run; a past drawdown is not a ceiling on future losses.
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