{"id":2755,"date":"2024-07-24T08:08:00","date_gmt":"2024-07-24T08:08:00","guid":{"rendered":"https:\/\/ftmo.com\/au\/?p=2755"},"modified":"2026-07-24T08:11:34","modified_gmt":"2026-07-24T08:11:34","slug":"watch-out-for-open-losses-why-equity-matters-more-than-balance","status":"publish","type":"post","link":"https:\/\/ftmo.com\/au\/blog\/watch-out-for-open-losses-why-equity-matters-more-than-balance\/","title":{"rendered":"Watch out for open losses: Why Equity Matters More Than Balance"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\" id=\"h-although-we-have-been-offering-our-ftmo-accounts-to-retail-traders-for-several-years-we-often-see-confusion-around-one-of-the-most-critical-risk-management-metrics-the-maximum-daily-loss-rule\"><em>Although we have been offering our FTMO Accounts to retail traders for several years, we often see confusion around one of the most critical risk management metrics: the <\/em><strong><em>Maximum Daily Loss<\/em><\/strong><em> rule.<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>To pass the FTMO Challenge and trade successfully, it is essential to understand the difference between your <\/em><strong><em>account<\/em><\/strong><em> <\/em><strong><em>balance<\/em><\/strong><em> and your <\/em><strong><em>account<\/em><\/strong><em> <\/em><strong><em>equity<\/em><\/strong><em> and why your lowest equity is the only number that truly matters when managing risk.<\/em><\/p>\n\n\n\n<h2 id=\"h-what-is-equity-and-why-is-it-different-from-balance\" class=\"wp-block-heading\">What Is Equity and Why Is It Different from Balance?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To put it simply:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Balance<\/strong> is your account&#8217;s value, only counting closed trades. It does not change while a trade is currently open and running.<\/li>\n\n\n\n<li><strong>Equity<\/strong> is your real-time account value. It includes your balance plus the live, floating profit or loss of all your currently open trades.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">If you have a $100,000 balance but your open trades are currently losing -$2,000, your real-time equity is $98,000. <strong>Equity is the true financial state of your account at any given second.<\/strong><\/p>\n\n\n\n<h2 id=\"h-the-danger-of-ignoring-open-losses-the-lowest-equity-concept\" class=\"wp-block-heading\">The Danger of Ignoring Open Losses (The Lowest Equity Concept)<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">We often see traders who use trend-following or breakout strategies. They might hold positions that dip heavily into the red before eventually bouncing back to close in profit.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">While their balance curve looks great at the end of the day, their equity curve tells a different story. If we didn&#8217;t track open losses, a trader could hold a massive losing position, risk blowing the entire account, and still pass the Evaluation just because the trade eventually turned around.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is why we focus on your <strong>lowest equity.<\/strong> The Maximum Daily Loss rule tracks the absolute lowest point your equity reaches during the day, even for a split second. If your floating (open) losses drag your real-time equity below your daily limit, the rule is violated, regardless of whether that trade later bounces back to a profit.<\/p>\n\n\n\n<h2 id=\"h-why-we-enforce-this-rule\" class=\"wp-block-heading\">Why We Enforce This Rule<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Opening large positions without a stop loss, hoping the market will &#8220;definitely turn around,&#8221; shows a lack of discipline and serious risk management problems. Relying on hope instead of a strict stop loss makes it highly likely that an unforeseen market event will wipe out the account.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">By tracking your lowest equity, we ensure that traders aren&#8217;t taking reckless, hidden risks. It is a safeguard designed to build consistent, disciplined habits.<\/p>\n\n\n\n<h2 id=\"h-know-your-limits\" class=\"wp-block-heading\">Know Your Limits<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">At FTMO, we understand that market conditions vary, which is why we provide a generous Maximum Loss buffer and Maximum Daily Loss limit. These rules are in place to help you manage risk and protect your capital.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Make sure you fully understand your specific Trading Objectives before opening a trade. For a detailed breakdown of how your limits are structured, please review the rules directly on our <a href=\"https:\/\/ftmo.com\/au\/trading-objectives\/\" data-type=\"link\" data-id=\"https:\/\/ftmo.com\/au\/trading-objectives\/\"><strong>Trading Objectives page<\/strong><\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Although we have been offering our FTMO Accounts to retail traders for several years, we often see confusion around one of the most critical risk management metrics: the Maximum Daily Loss rule. To pass the FTMO Challenge and trade successfully, it is essential to understand the difference between your account balance and your account equity [&hellip;]<\/p>\n","protected":false},"author":19,"featured_media":2756,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[14],"tags":[],"class_list":["post-2755","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trading-tips"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Watch out for open losses: Why Equity Matters More Than Balance | FTMO Australia<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ftmo.com\/au\/blog\/watch-out-for-open-losses-why-equity-matters-more-than-balance\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Watch out for open losses: Why Equity Matters More Than Balance\" \/>\n<meta property=\"og:description\" content=\"Although we have been offering our FTMO Accounts to retail traders for several years, we often see confusion around one of the most critical risk management metrics: the Maximum Daily Loss rule. 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