Implementation guide · Prop Evaluation Rules
Maximum Drawdown: Peak, Trough and Recovery
Calculate drawdown from a declared balance or equity series, with a worked example separating the largest money decline from the largest percentage.
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Published by FxTrusts, a supplier of brokerage and prop firm technology. Prepared with AI-assisted research and drafting; reviewed against the cited public sources. Examples are illustrative. Product links describe our services.
Quick answer
Maximum drawdown is the largest decline from an earlier peak to a later trough within a defined data series and period. State whether the series uses balance or equity, how cash flows are treated and whether the result is a money amount or percentage. Those choices can identify different intervals.
Construct a consistent series
Choose balance or equity before calculating peaks. Balance-based observations can miss losses in open positions, while equity observations depend on price sampling and included account components. Deposits and withdrawals can create apparent changes unrelated to trading performance unless the method adjusts for them. The MetaTrader history report distinguishes several drawdown statistics; B2COPY documents its own calculation approach. Neither automatically defines a prop firm’s contractual breach rule.
Compare each point with its prior peak
Maintain the highest earlier value in the chosen series. At each observation, subtract the current value from that peak to find the money decline. Divide the decline by the peak for a percentage measure when the denominator is positive. A later recovery can end a drawdown episode but does not erase its historical depth. Keep the peak and trough timestamps so another reviewer can reproduce the selected interval.
Money and percentage maxima can differ
A decline of 20 from a peak of 200 is 10%, while a decline of 18 from 120 is 15%. The first is the larger money decline and the second the larger percentage decline. A report that labels either number simply maximum drawdown leaves an important ambiguity. Include units and methodology in a dashboard, particularly when comparing accounts with different sizes or changing capital over the measured period.
Do not use a report metric as a breach decision
A historical maximum computed from end-of-day balance may not show an intraday equity breach. Conversely, a program can apply a fixed initial-capital floor that is unrelated to the largest previous peak. The operational rule needs its own baseline and sampling definition. For implementation testing, retain both the metric calculation and the rule evaluation as separate outputs rather than assuming that one percentage serves both purposes.
Largest money decline versus largest percentage
This synthetic six-point equity series contains no cash flows and uses the displayed observations only. From 120 to 102 the decline is 18, or 15%. From 200 to 180 it is 20, or 10%. The money maximum is therefore 20 while the percentage maximum is 15%; they occur in different intervals. Values between the observations are unknown.
| Observation | Equity units | Prior/current peak | Drawdown |
|---|---|---|---|
| 1 | 100 | 100 | 0% |
| 2 | 120 | 120 | 0% |
| 3 | 102 | 120 | 18 units; 15% |
| 4 | 200 | 200 | 0% |
| 5 | 180 | 200 | 20 units; 10% |
| 6 | 210 | 210 | 0% |
Implementation checklist
- Declare balance or equity basis, period and sampling frequency.
- Document cash-flow treatment and handling of non-positive denominators.
- Report money and percentage maxima with their own peak/trough times.
- Keep historical performance metrics separate from contractual loss limits.
Sources
These documents support the reference. Check the original publication for current requirements and the limits of its scope.
- MetaTrader 5 trading history reportwww.metatrader5.com
- B2COPY drawdown calculationb2broker.com
- MQL5 account propertieswww.mql5.com
Continue with the broader guides
Connect this reference to platform selection and the wider operating workflow.