The deposit problem
Open any equity chart after a deposit and you will see a cliff going up. The chart is right: you do have more money. But it says nothing about whether your EA is any good. A withdrawal does the opposite, and makes a healthy strategy look as if it crashed.
The same thing happens to the percentage most people quote. If equity went from 1,000 to 1,520, it is tempting to say the account is up 52%. If 500 of that was a deposit, the account made 20, not 520, and how well it did depends on when the deposit arrived.
This is why a curve that climbs in neat steps should make you ask a question. It often means more money was added, not that more money was made.
How units work
Funds have solved this for a long time, with units. Think of your account as a small fund with you as its only investor. On the first day, every dollar in the account buys one unit, so one unit is worth 1.0000.
A deposit buys new units at today's price, so the price of a unit does not move when money comes in. Only wins and losses move it. That price is the NAV per unit: net asset value, divided by the number of units.
A worked example
An account starts with 1,000 USD. Its EA makes 100. Then you deposit 500, and the EA loses 80. The figures are made up to show the method; they are nobody's results.
| Step | Equity | Units | NAV per unit | Return |
|---|---|---|---|---|
| Start | 1,000.00 | 1,000.00 | 1.0000 | 0.00% |
| Trades +100 | 1,100.00 | 1,000.00 | 1.1000 | +10.00% |
| Deposit 500 | 1,600.00 | 1,454.55 | 1.1000 | +10.00% |
| Trades −80 | 1,520.00 | 1,454.55 | 1.0450 | +4.50% |
The deposit bought 500 ÷ 1.1000 = 454.55 new units. NAV per unit stayed at 1.1000, because nothing was traded. The loss of 80 then fell on all 1,454.55 units, and took one unit from 1.1000 to 1.0450.
Equity alone would say the account is up 52%. The units say +4.50%. They also show something equity hides behind the deposit: the last stretch of trading lost 5% of the account's value.
Drawdown uses NAV too
Drawdown is how far the account sits below its best point so far. Measured on NAV per unit, it means the same thing whatever money you moved.
In the example the peak was 1.1000 and NAV per unit is now 1.0450, so the drawdown is 1 − 1.0450 ÷ 1.1000 = 5.00%. Measured on equity, the account looks like it is at a new high, and the 5% loss disappears behind the deposit.
The same rule holds across accounts. You cannot add up the drawdowns of several accounts; the portfolio needs a NAV of its own. Why drawdowns don't add up explains how.
Withdrawals work the same way
Say you now take 400 out of the account in the example. A withdrawal sells units at today's price: 400 ÷ 1.0450 = 382.78 units. Equity falls to 1,120.00, the account holds 1,071.77 units, and one unit is still worth 1.0450.
So taking profit out does not show up as a loss, and the account's track record carries on from where it was. If you empty an account and fund it again later, the units start again at the last price, so its history stays in one piece.
In Quantrivance
Done for you, on every account
The dashboard keeps units for each MT5 account and for your whole portfolio. Deposits, withdrawals and transfers between your own accounts never show up as profit, and a broker's bonus or credit counts as money in. Broker rebates count as return: see Broker rebates: return or deposit?.
This post is for education and is not investment advice. Examples use made-up figures, not anyone’s results. Trading carries risk.