Drawdown rules are among the most critical elements of any proprietary trading challenge. Whether you're navigating a 2-step evaluation or instant funding model, understanding the difference between balance-based and equity-based drawdown can be the key to your success—or failure. In this article, we break down both models and help you decide which is best suited for your trading style.
Defining the Terms
- Balance-Based Drawdown: Considers only closed trades when evaluating your drawdown limits.
- Equity-Based Drawdown: Considers real-time equity—including floating PnL—for drawdown violations.
Key Differences
| Feature | Balance-Based | Equity-Based |
|---|---|---|
| Floating Loss Impact | No | Yes |
| Real-Time Monitoring | Less Critical | Crucial |
| Risk Flexibility | High | Low |
| Swing Trading Friendly | Yes | No |
| Suitable for Scalping | Yes | Yes |
Real-World Scenarios
- Swing Trader: Likely to prefer balance-based models, as trades may be in drawdown before they profit.
- Scalper/Day Trader: Can adapt well to equity-based models due to fast trade turnover.
Which Firms Use What?
| Prop Firm | Prop firms drawdown model (Balance-Based) |
|---|---|
| FunderPro | Equity (No balance-based drawdown.) |
| FunderPro Futures | Balance |
| Funding Pips | Equity (No balance-based drawdown.) |
| FXIFY | Balance (All evaluations except Lightning and Instant Funding use balance-based drawdown.) |
| FundedNext | Balance (All programs support balance-based drawdown.) |
| FTMO | Balance (All programs support balance-based drawdown.) |
| Apex Trader Funding | Balance |
| Bullwaves Prime | Equity (No balance-based drawdown support.) |
| the5ers | Equity (No balance-based drawdown.) |
| SabioTrade | Balance |
| Hola Prime | Balance (Most challenges support balance-based drawdown. Direct account does not.) |
| NeomAAA Funds | Balance |
| Top One Futures | Balance |
| Take Profit Trader | Balance |
| ThinkCapital | Balance (Firm offers balance-based daily drawdown for its funding programs.) |
| UltraCap Trading | Balance |
| TX3 Funding (Toptier Trader Rebrand) | Balance (Top Tier Challenge supports balance-based drawdown. Top Tier Plus does not.) |
| MyFundedFX | Equity (No balance-based drawdown.) |
| BlueBerry Funded | Equity (Two-step, One-step, and Rapid Challenges do not support balance-based drawdown.) |
| Topstep | Balance |
| Blue Guardian | Balance (Applies to Unlimited, Elite, and Three-step Guardian. Not applicable to Rapid and Instant Funding.) |
| FTUK | Balance (All programs support balance-based drawdown.) |
| Funded Trading Plus | Balance (Applies to Prestige Trader and Master Trader programs. Others do not.) |
| Top One Trader | Balance |
| For Traders | Balance |
| 1of1 Funding | Balance |
| Alpha Trader | Balance |
| DNA Funded | Balance |
| PROP365 | Balance |
| Funded Squad | Balance |
| Propel Capital | Balance |
| Plutus Trade Base | Balance (All programs support balance-based drawdown.) |
| Elites Funding | Balance |
| EverBlue Trader | Balance |
| PIP Traders Funding | Balance |
| Bold Fund | Balance |
| Clarity Traders | Balance |
| Tycoon Funded | Balance |
| Upcomers | Balance |
| TradingFunds | Equity (Two-step and One-step Evaluations do not support balance-based drawdown.) |
| Funded Prime | Balance |
| SuperFunded | Balance |
| TakeCap | Balance |
| Earn2Trade | Balance |
| Crypto Fund Trader | Equity (No balance-based drawdown.) |
| City Traders Imperium | Balance (All programs support balance-based drawdown.) |
| E8 Markets | Equity (E8 Evaluation and E8 Track do not use balance-based drawdown.) |
| Lux Trading Firm | Equity (No balance-based drawdown.) |
| Goat Funded Trader | Equity (No balance-based drawdown.) |
| The Trading Pit | Equity (No balance-based drawdown.) |
Pros and Cons Summary
Balance-Based:
- ✅ More forgiving on strategy execution
- ❌ Can mask bad habits (over-leveraging, delayed stop-losses)
Equity-Based:
- ✅ Promotes real-time discipline and risk awareness
- ❌ More challenging, especially for swing traders
Trader Tips for Success
- Match your challenge type to your strategy
- Always read the fine print on firm rules
- Use alerts or automated tools to track equity in real time
Conclusion
Understanding the drawdown model isn’t optional—it’s essential. Choosing the wrong model for your trading style can cost you the evaluation. But armed with this knowledge, you can find the right fit and maximize your chances of getting funded.
Frequently Asked Questions (FAQs)
Balance-based is typically easier for beginners due to its forgiving structure on open trades.
Yes, some firms apply equity-based daily drawdown and balance-based overall drawdown in the same program.
If you're a swing or news trader, choose balance-based. If you're a scalper or intraday trader, equity-based may work better.
