When you hear someone say floating profit, it means exactly that. Money is in the air! It’s not in your grasp yet. If you place a trade and you are currently up $2358, that is your floating profit. It’s “floating” because it’s constantly moving. $2358 goes to $2300, which goes to $2250, which goes to $2344, which goes to $2500. All of those different price points is YOU being in floating profit.

Drawdown on the other hand means the exact opposite. If you’re in a trade and you’re losing $-30, that is your drawdown. If you’re losing $-100, that is your drawdown.

If you end up closing the trade with $1000 PROFIT, another trader may ask you: “Hey bro, how much drawdown were you in to get $1000?” Whatever the maximum amount of money you were losing at one point in time is what you’d respond with. If the MOST you were losing at one point in time was $-100 before price reversed and shot directly in your favor, you’d tell him: “Only $-100. I wasn’t too worried because my stop loss was at $-250, giving me a 1:4 Risk to Reward Ratio!”

NOTE: We will discuss Risk-To-Reward Ratio a little bit later.

When you see “Equity” in your trading account, all that means is how much money you have in your account + your floating profit/drawdown.

If you have $2,000 in your account but your CURRENT trade is losing $-77, your account balance will STILL say $2,000 because you haven’t officially closed the trade yet (drawdown), but your EQUITY will show $1,933. If you close the trade, your account balance will show $1,933.

If you have $2,000 in your account but your CURRENT trade is up $200, your account balance will STILL say $2,000 because you haven’t officially closed the trade yet (floating profit), but your EQUITY will show $2,200. If you close the trade, your account balance will show $2,200.

I know…. There’s a lot of different things to learn. Don’t worry! Once you start demo trading, it’s going to all make sense. With enough practice, it should be pretty easy to comprehend once you see it in real time on a demo account!

We also haven’t even gotten to the good stuff yet! The charts you see all over social media! The actual graphs when it comes to the market that help you make money! (Technical Analysis). That is coming SOON! We have a few more sections to breeze by before we end up there, so don’t stop now 😂 STAY FOCUSED and move on to the next section.

All of this plays a part in your trading journey. Do you think Steph Curry just became the greatest shooter in NBA history just from shooting from 30? A lot of fundamentals came into play in order for him to accomplish such a feat! Fundamentals such as weight lifting to be strong enough to shoot that far, form shooting directly under the basket to keep his shooting motion perfect, and a lot of monotonous drills that don’t seem like it would be better than just picking up a basketball and immediately shooting from 30, but trust me, it all plays a part!