Equity drawdown, losing streaks and recovery

Balance is not the whole account

Balance reflects realized outcomes; equity also reflects open positions. An EA may postpone closing losses, making its closed-results curve look calmer than the risk actually experienced. Inspect open exposure and margin alongside equity. A daily-close series can miss an intraday trough and should not be described as a tick-level maximum drawdown.

Measure depth and waiting time

Define the preceding peak, subsequent trough and recovery point. Record both monetary and percentage decline. The deepest loss period and the longest time under water may be different episodes. If recovery has not occurred by the cutoff, label the interval as unrecovered instead of ending it at an arbitrary convenient date.

Use losing streaks as a scenario

For a drawdown fraction D, required recovery gain is D divided by (1-D). This only expresses the change of denominator. It does not show that recovery will happen. Losing-streak scenarios should specify fixed-reference or balance-based sizing, additional costs and concurrent positions; then check whether margin and minimum-volume rules would permit those trades.

Checks to make before deciding

• Export both balance and equity series if available. Identify whether each plotted point is a tick, bar, daily close or trade close; these series can capture different troughs.
• Define equity drawdown from each preceding equity peak to subsequent trough. Record absolute amount, relative percentage, timestamps and whether the peak was actually recovered.
• Keep absolute, maximal and relative drawdown definitions distinct. Verify your calculation against the MT5 report before using one label for a different measure.
• Inspect worst floating losses and maximum concurrent exposure. Closed-trade drawdown cannot prove that the account avoided margin stress between exits.
• Measure historical longest loss sequence using the declared trade unit and cost convention. Keep zero outcomes separate or define explicitly how they affect the sequence.
• Inspect streaks by calendar time as well as trade count. Ten losses in a week can create different operational pressure from ten losses spread over a year.
• Calculate a fixed-reference scenario: repeated full stop budgets reduce capital linearly until depleted. Label it as an assumed loss scenario; include extra costs separately.
• Calculate a current-balance scenario: after n identical fractional losses, balance is start x (1-r)^n before fees and rounding. This ignores gaps, margin and actual EA trade selection.