The definition, and why it is not pedantry
equity = balance + floating profit and loss on open positions
Balance moves when a trade closes. Equity moves every tick.
Prop firm rules are written against equity, and the reason is straightforward from the firm's side: they carry the risk of your open positions, not just your closed ones. A trader sitting on a large unrealised loss has already spent the firm's money in every sense that matters to the firm.
The practical consequence is that you can breach on a position you never closed. The trade may recover and finish green; the account is already gone, because the limit was tested at the moment equity crossed it, not at the moment you booked the result.
This is also why our own engine treats the two numbers separately at every step rather than collapsing them into one — the daily limit may or may not include floating, the target usually does not, and the drawdown floor almost always does.
Where floating is counted and where it is not
The same account can have three different answers to "how am I doing" at the same instant, and all three are correct for their own rule:
| Rule | Usually measured on | Effect |
|---|---|---|
| Maximum drawdown | equity | An open loss can breach you |
| Daily loss limit | equity or balance — it is a per-firm setting | Determines whether an open loss ends your day |
| Profit target | closed balance, almost always | Unrealised gains do not pass a challenge |
The asymmetry in that table is the whole game, and it points one way.
Open losses can fail you; open profits cannot pass you. A trader sitting on a large unrealised gain at the target level has not passed and has to close to prove it, while a trader sitting on an equivalent unrealised loss may already have failed. That is not unfair — it follows directly from the firm carrying the risk — but it is the opposite of how the equity line on the platform feels, and it is worth internalising before a position gets big.
Our engine reflects this: the target can be configured to count equity, but the default is closed balance, because that is what firms overwhelmingly require.
Cash movements: not profit, and not neutral either
Deposits, withdrawals, credits and bonuses are not trading results, and every honest evaluation excludes them from profit. Otherwise a deposit would pass a challenge and a payout would look like a losing day.
So our engine strips cash flows out of the profit target, out of net profit, out of the daily loss calculation and out of the consistency figures. A withdrawal on a Tuesday does not make Tuesday a losing day.
Drawdown is the exception, and it is not an inconsistency. The drawdown floor is measured against capital, not earnings — the firm compares your equity to a level, and money leaving the account genuinely reduces your equity. So a payout moves you closer to the floor even though it was not a loss, and a deposit moves you away from it even though it was not a gain.
Two sentences that are both true and feel contradictory:
- A withdrawal is not a loss. It does not count against your target, your daily limit, or your consistency.
- A withdrawal reduces what you can afford to lose. Your buffer to the floor shrinks by exactly the amount you took out.
The first is about earnings and the second is about capital. Firms ask both questions and expect different answers, so a tracker that applies one treatment to everything is wrong in one of the two places.
The stale-snapshot problem
Everything above assumes you know your current floating P&L. In practice a journal learns it from periodic snapshots, and between them the figure is unknown.
That is why our report carries the age of the snapshot alongside the equity figure and flags it when it goes stale. A remaining-room number computed from a five-minute-old view of your open positions is not wrong exactly, but it is a statement about five minutes ago, and on a fast market that is a different account.
The honest interface says which. A number displayed without its age invites you to treat a stale figure as live, and the moment that matters most — a violent move against an open position — is exactly the moment a snapshot is most likely to be behind.