Equity is the live value of your broker account at any given moment. It is your balance plus the floating profit or loss of every open position. The formula brokers use is straightforward: Equity = Balance + Floating P/L. When nothing is open, the two read the same number. The moment a position opens, they diverge.
A position moving in your favor pushes equity above balance. A position bleeding against you pulls equity below. The figure shifts with every tick, in real time, well before any position is closed. Balance, by contrast, sits still until positions settle.
This is the number brokers act on. Stop-out levels, margin calls, and forced closures all trigger off equity, not balance. Drop too far and the broker steps in to protect itself: warnings first, then closures starting with the worst position until used margin fits inside what is left.
Javlot applies your configured drawdown cap the same way, against equity rather than balance. If the floating loss on open positions crosses your threshold, every position closes immediately. Waiting for positions to settle would mean acting on yesterday's number while today's is still falling.