Balance, equity and what each firm tests
Balance is the sum of closed results. Equity is balance plus the open profit or loss of positions, usually net of costs. FTMO defines its daily floor against equity, written as balance plus open positions profit or loss, plus or minus swaps, minus commissions. If equity falls below the limit at any moment, the rule is violated. Topstep says its Maximum Loss Limit is calculated on real-time unrealized profit and loss, and the system closes the position when the open loss hits the threshold. Alpha Capital describes its daily drawdown as balance-based. Always read which one a firm uses.
A breach that closes green
Take a 100,000 account with a daily floor at 95,000. A long position opens with a stop at 94,000. Price dips and equity touches 94,900, then recovers, and the trade closes for a profit. A closed-trade backtest shows a winner. An equity-based rule shows a breach at the dip, and the account ended before the recovery. The trade's final result is irrelevant once the floor was touched.
Why end-of-day tests miss it
An end-of-day test records one number per day. The breach lived inside the day. A strategy with wide stops, overnight holds or large positions spends time far from its entry, and the lowest equity of the day can be much lower than the close. Only a path of equity at fine time steps shows it.
Open trades across the daily reset
The5ers sets its daily floor from the higher of the previous close balance or equity. In the firm's example, a balance of 105,000 and a floating loss of 1,000 give equity of 104,000, but the snapshot is taken from the higher 105,000 level. A position carried across the reset therefore starts the new day with its open loss counted against a higher reference. The reset time matters, and it is 00:00 server time there.
Slippage and gaps
A floor is tested on actual prices. A gap or slippage can move equity through the floor in one print. The Trading Pit warns that its daily pause is a safety feature and not a hard stop, because slippage can carry a loss beyond it and beyond the maximum drawdown. Sizing to leave a margin below the floor is the only protection.
A replay method
Collect a timestamped ledger of fills and, for each open position, the price path at one-minute resolution or finer. Recompute equity at each step as balance plus open profit and loss minus costs. Record the minimum per day. Apply each firm's daily and overall floors with their reset times. Flag any step below a floor. If you only have closed trades, use the maximum adverse excursion of each trade as a conservative proxy.
Sizing from the replay
If the replay shows the lowest equity of a typical bad day at 60% of the daily limit, size has room. If it reaches 90%, a normal variation can breach. Leave a margin, since replays use past data and the future will contain a worse day. The effective risk budget page turns floors into position size.
What to verify with the firm
Ask whether the floor uses equity or balance, whether swaps and commissions are included, how a reset is timed and whether a breach is judged on the platform's equity feed or on a separate system. Keep the written reply.
A small numeric illustration
On a 50,000 account with a 2,000 dollar trailing floor at 48,000, a trader enters a position that moves 2,100 dollars against it before reversing for a 600 dollar gain. The floor was crossed on the adverse move. The closed-trade ledger shows a 600 dollar winner and the equity path shows a breach. Only data at fine time steps, or the trade's maximum adverse excursion, would have revealed it. Keep the raw price path with the ledger so that you can rerun the test when a rule changes.
How this was sourced
Official material checked for this draft on 2026-10-27. Product terms, residence eligibility, promotions, payout rules and fees can change. Reverify before publishing or purchasing.
Editorial disclosure
QuantProp has no verified commercial relationship with the firm(s) discussed in this article. This is an independently drafted rules comparison, not an endorsement or proof of payout reliability. No affiliate links are active. Trading evaluations can involve fees and substantial loss or failure risk.
Revision log
2026-10-28: imported from the editorial pack dated 2026-10-27; approved for publication by the owner. Facts are as of 2026-10-27 and were not independently tested. 2026-10-28: Dropped the empty 'Worked example or implementation note' heading. 2026-10-28: Dropped 'Operational example': its text duplicated an earlier section word for word. 2026-10-28: Rewritten from a 238-word stub. Added official equity definitions read on 2026-10-28 (FTMO, Topstep, The5ers), worked intraday breach examples, a replay method and Q&A.
Frequently asked questions
Can a winning trade breach a prop firm drawdown?
Yes, under an equity-based rule. If open equity touches the floor during the trade, the account ends even if the trade later closes in profit.
Does FTMO count open positions in the daily loss limit?
Yes. Its equity is balance plus open positions profit or loss, plus or minus swaps, minus commissions, and the rule is violated if equity falls below the limit.
How does Topstep treat unrealized losses?
Its Maximum Loss Limit is calculated on real-time unrealized profit and loss, so an open loss that hits the threshold closes the position and the liquidation stands.
What if I only have closed-trade data?
Use each trade's maximum adverse excursion as a conservative proxy for the intraday low, then add a margin. Closed results alone will understate the breach risk.
Is a stop-loss enough protection?
Not alone. A stop set beyond the daily floor does not protect the floor, and slippage can push a fill beyond the stop. Size so that the stop distance sits well inside the floor.