If you are trading a 1-step account, the applicable maximum drawdown rule is outlined here.
An important point of clarification: demo account balance and demo account equity are two different things.
Demo account balance refers to the balance of the demo account not including any open positions.
Demo account equity refers to the balance of the demo account including any open positions.
Your demo account balance and demo account equity are visible and trackable in real-time via our trading terminals.
Maximum drawdown = [starting demo account balance] - [fixed drawdown amount]
Maximum daily loss and maximum drawdown are in force at the same time. Reaching or exceeding either of these thresholds will result in a breach of the risk rules.
Slippage, commissions, swaps, and any other fees apply to this rule.
Maximum drawdown is the overall loss limit for a demo account.
Reaching and/or exceeding the maximum drawdown will result in a breach of the risk rules.
In your Breakout Evaluation, you will be subject to a maximum trailing drawdown.
Specifically, the maximum drawdown amount is fixed (in USD) based on your starting account balance. This fixed amount is applied to your highest account balance.
For example: You have a fresh $100,000 account. The maximum drawdown is 8%. 8% of $100,000 is $8,000. Your maximum drawdown amount in this example will always be [highest account balance] - $8,000.
The maximum drawdown only trails up (i.e. higher than the starting balance) and does not trail down (i.e. lower than the starting balance). It will also not trail past the starting balance.
For example: You have a fresh $100,000 account. The maximum drawdown is 8%. The maximum drawdown amount is fixed at 8% of $100,000 i.e. $8,000. If your account equity reaches or falls below $92,000 - which is an $8,000 reduction from the starting balance - the account will be in breach of the maximum drawdown rule.
Example continued: You have a fresh $100,000 account. You take a trade resulting in a 5% account gain, increasing your balance to $105,000. At that point, the maximum drawdown trails to $8,000 below your new highest account balance i.e. $8,000 decrease from $105,000 = $97,000. That is your new maximum drawdown until your account balance increases.
Example continued: You have a fresh $100,000 account. You take a trade resulting in a 7% account gain, increasing your balance to $107,000. At that point, the maximum drawdown trails to $8,000 below your new account balance i.e. $8,000 decrease from $107,000 = $99,000. You take another trade resulting in a 2% account loss, decreasing your balance to $105,000. Given that the maximum drawdown trails based on your highest account balance, your maximum drawdown is still $99,000.
Example continued: You have a fresh $100,000 account. You take a trade resulting in a 3% account loss, decreasing your account balance to $97,000. Given that the maximum drawdown does not trail down, your maximum drawdown is still an $8,000 decrease from your highest account balance i.e. $100,000 - $8,000 = $92,000.
Example continued: You have a fresh $100,000 account. You take a trade resulting in a 11% account gain, increasing your account balance to $111,000. Given that the maximum drawdown does not trail past your starting balance, your maximum drawdown is $100,000.
As a reminder, the maximum drawdown calculation is based on your account balance (closed positions) but you must not let your equity (open positions) reach or fall below your maximum drawdown level.
It is crucial that you understand the risk rules when taking a Breakout Evaluation.