1. What is Balance Drawdown
A Balance Drawdown is the percentage of decline in the balance in a trader's account. A balance drawdown is defined as the decline from a high peak to a pullback low of the balance in a trader's account (closed orders).
However, users including investors and traders all are interested in the maximum balance drawdown in a time period. So in addition to the balance drawdown at each time, we will learn more about the maximum balance drawdown in this article.
(The account overview shows the maximum balance drawdown)
2. How to calculate the Balance Drawdown
Example: Your balance is $1000. Then you place some orders.
Observe The Balance Drawdown column, we see 0.05 (5%) as the highest decline. So here comes the maximum balance drawdown.
Formula of the maximum equity drawdown:
3. Balance Drawdown Chart on FXCE
Users can view the balance volatility and balance drawdown through two charts on the FXCE platform:
- Balance - Equity Chart
- Drawdown Chart
Note: To view only the Balance parameters, click off the Equity line, the Equity Drawdown line, and the Floating Drawdown line.
a. View Drawdown from time to time
We can see in this account:
(Data was collected before 11/8/2021).
- At 20:01 on 28/05/2021: Initial balance is $ 2,000. The drawdown is 0%.
- At 23:42 on 28/05/2021: The balance decreased from $2,000 to $1,979.52.
Equity drawdown = (2,000-1,979.52)/2,000 *100%= 1.02%
b. View the maximum balance drawdown
Step 1: Find where the balance decreased the most
Looking at the overview of this account's Balance Drawdown Chart, we can see 3.63% as the highest drawdown (data was collected before 11/8/2021).
Click and drag if you want to enlarge the chart for detail and accuracy. Moving the mouse to the highest where the balance drawdown is 3.63%, we see at 01:00 on 29/07/2021 the balance is $2,128.29.
Step 2: Find the previous highest balance
In Balance Chart, zoom in on the chart for the period from 01:00 on 29/07/2021 to earlier and move the mouse to find the highest balance. The highest balance found is $2,208.51.
The maximum balance drawdown is (2,208.51 - 2,128.29)/2,208.51*100=3.63%
***Note: Withdrawal/Deposit has no effect on The Balance Drawdown.