Balance and equity are not bookkeeping synonyms. Under prop-firm loss rules, they can be the difference between "trade still open" and "account already dead."
As of June 29, 2026, FTMO's public FAQ defines balance as realized account value and equity as balance plus unrealized net profit and loss. Its current Trading Objectives page defines both Maximum Daily Loss and Maximum Loss on equity, not just on closed balance. That is why a floating loss can fail the account before a single trade is closed.
What balance and equity actually are
Balance is what has already happened. Equity is what the account is worth right now.
FTMO's current balance-versus-equity FAQ puts it plainly: balance changes when trades close, while equity moves with open profit and loss. For a prop trader, that distinction is not academic. It is the whole reason an account can look tidy on closed trades and still be in danger.
| Term | What it includes | When it moves | Why it matters |
|---|---|---|---|
| Balance | Closed P/L, deposits, withdrawals | When a trade closes or cash changes | Good for tracking realized progress |
| Equity | Balance plus open P/L | Continuously, while positions are open | Good for tracking whether the account is still alive |
What FTMO's current public rules actually check
FTMO's current public rule pages are useful because they separate the label from the mechanism.
On the FTMO Challenge: 2-Step, the same Trading Objectives page says Maximum Daily Loss is 5% of initial simulated capital, recalculated daily at 00:00 CE(S)T from the account balance recorded at that time. The same page says Maximum Loss is a static 10% floor from initial simulated capital. Both are defined on equity, and FTMO's current Maximum Daily Loss and Maximum Loss explainers say the calculation includes open positions, commissions, and swaps.
On FTMO Challenge: 1-Step, the current public page uses the same equity logic but a different mechanic: Maximum Daily Loss is 3%, while Maximum Loss is described as an end-of-day trailing floor. That is the practical lesson. The label is not enough. You need to know both:
- whether the rule is checked on balance or equity
- whether the floor is static, daily-reset, or trailing
If you want the static-versus-trailing distinction on its own, daily loss limit vs max loss for prop traders and prop firm trailing drawdown, explained properly break that part out separately.
The trap: balance can look fine while the account is already breached
This is the mistake traders keep making. They watch balance, assume the rule is safe, and forget that the rule is watching equity.
Take the current FTMO 2-Step style example on a 100,000 account:
- Maximum Daily Loss floor for Day 1:
100,000 - 5,000 = 95,000 - Maximum Loss floor:
100,000 - 10,000 = 90,000
Now imagine the trader opens a position and it moves against them.
| Moment | Balance | Equity | Rule status |
|---|---|---|---|
| Start of day | 100,000 | 100,000 | Safe |
| Open position at -4,700 | 100,000 | 95,300 | Still safe |
| Open position at -5,100 | 100,000 | 94,900 | Daily loss breached |
Nothing has closed. Balance has not moved. The account can still fail.
That is before commissions and swaps. FTMO's current public material says those count too, which means the practical buffer is slightly smaller than the clean arithmetic suggests.
The midnight reset creates a second trap. Suppose Day 1 closes at 103,000. On FTMO's current 2-Step rules, Day 2's daily floor becomes 103,000 - 5,000 = 98,000. If an overnight position drifts to an equity of 97,800 after the reset, the day is breached even though balance is still 103,000 and the account is still above the original 100,000 start.
That is the whole problem in one line: balance can look healthy while equity has already crossed the floor that matters.
What this changes in the way you read a backtest
A prop-style backtest is incomplete if it only shows closed-trade drawdown or an end-of-day balance curve. That can flatter survivability because prop rules care about the ugly floating low, not just the tidy number after the trade is over.
An honest prop backtest should answer four harder questions:
- What was the worst intraday equity excursion relative to the daily-loss rule?
- Were floating P/L, commissions, swaps, spread, and slippage included?
- Is the overall floor static, daily-reset, or trailing?
- What happens when the same trades arrive in a worse order?
That last question is why sequence stress matters. The account does not fail because its long-run average was unimpressive. It fails because a bad cluster arrived before the edge had time to recover.
realbacktesting publishes verifiable, prop-firm-ready cTrader research, and the relevant part here is the method. The published harness runs on cTrader broker M1 bars plus tick-measured spread from 2021-06-01 to 2026-06-20, sizes from an 80,000 EUR model base, charges real per-symbol spread, commission, swap, and 1 bps slippage, and enforces drawdown ceilings at the 95th percentile of 20,000 Monte Carlo simulations on the per-day intraday excursion, then confirms them on a 30% out-of-sample hold-out. The research and cBot engines also show 100% signal parity across 13 strategies and 175,401 bars. The full proof chain is on how the methodology handles costs, path risk, and parity, and the account-survival side is on the funding model.
If you want the companion explainer on path stress, why Monte Carlo drawdown matters for prop traders is the next piece to read.
Balance is still useful. It is just not your emergency gauge.
Balance is not useless. On FTMO's current public 2-Step rules, balance is part of the daily reset calculation at midnight CE(S)T. It also tells you what profit was actually locked in after trades closed.
But if the question is "am I close to a breach right now?", balance is the wrong screen to trust. Equity is the emergency gauge because equity is what the rule can kill you on.
That sounds obvious after the fact. Before the fact, it is where a lot of accounts die.
Frequently asked
Can a prop account fail while balance is unchanged?
Yes. If the firm checks drawdown on equity, an open loss can push equity through the rule even while balance still shows the starting number. FTMO's current public rules explicitly use equity for this reason.
Does FTMO currently count open positions in its loss rules?
Yes. As of June 29, 2026, FTMO's public Trading Objectives, Maximum Daily Loss, and Maximum Loss pages say the calculation includes open positions, commissions, and swaps. That is why floating loss is not a side detail.
Is balance useless for a prop trader?
No. Balance still matters for realized progress and, on FTMO's current 2-Step rules, for the next day's daily-loss reset reference. It is just not the number that tells you whether the account is about to fail right now.
What is the first backtest number worth asking for?
The first useful number is the worst per-day intraday equity excursion relative to the firm's daily-loss rule. If a backtest cannot answer that, the neat closed-trade curve is missing the part prop rules actually police.
The stubborn takeaway is simple: balance tells you what the account closed with. Equity tells you whether the account survives the next few ticks. Under prop-firm drawdown rules, that is not a cosmetic difference.