Trailing Max Drawdowns (Challenge Accounts Only - Not Funded)
Our drawdown policy on Challenge Accounts is based on trailing realized gains. This means the drawdown level only adjusts upward based on profits from trades that you have closed, not on unrealized (open) trades. Here’s how it works for each account size:
Account Sizes and Max Drawdown Limits:
50K Account: $2,000 Max Loss Limit
100K Account: $3,000 Max Loss Limit
150K Account: $4,500 Max Loss Limit
If your account hits the maximum loss limit, the account will be closed.
Example Scenario with a 50K Account
For a 50K account, the starting max drawdown level is set at $48,000 (50,000 - 2,000). Here’s how the drawdown adjusts based on your trading activity:
Trade 1:
You make an unrealized profit of $1,000 but don’t close the trade.
Since the trade is open, the drawdown level remains at $48,000.
Trade 2:
You close a trade at a loss, so your account balance remains under $50,000.
The drawdown level still stays at $48,000 because there were no realized gains.
Trade 3:
You close a trade with a profit, bringing your account balance to $51,000.
Now, your max drawdown level adjusts to $49,000 (51,000 - 2,000) because the gain was realized.
The key takeaway is that the max drawdown trails upward only when profits are locked in by closing a trade. This allows you to secure gains while maintaining a protective buffer that moves up with your realized profits.
The Trailing Max Drawdown in the challenge phase is designed as a preparation tool for your future funded account, where you’ll gain even more flexibility with an End-of-Day Drawdown. Here’s how it sets you up for success:
Skill Development: The trailing drawdown in the challenge encourages disciplined trading, teaching you to lock in gains, manage risk, and trade with intention. These skills are essential for sustainable success when you move on to funded trading.
Realistic Risk Management Practice: Since the challenge phase focuses on a conservative drawdown model, you’ll develop a solid approach to risk that will benefit you in the funded account, where you’ll have more leeway.
Increased Freedom in Funded Accounts: Once you reach the funded level, the drawdown policy switches to an End-of-Day Drawdown, giving you more control over intraday fluctuations. This lets you take advantage of larger market moves during the day without worrying about immediate drawdown adjustments—allowing for greater trading flexibility.
Structured Path to Growth: By adapting to the trailing drawdown now, you’re building a habit of securing gains, which can lead to a stronger foundation when you advance to the funded level. This structure helps ensure you’ll be well-prepared to make the most of the increased freedom in the funded account.
In summary, the Trailing Max Drawdown is not just a rule—it’s a stepping stone to help you grow and develop into a confident, consistent trader.
End-of-Day Drawdown Policy (Funded Accounts)
In funded accounts, the drawdown adjusts only at the end of the trading day based on the account's end-of-day balance. This gives you more flexibility during the day, as the drawdown won’t change until the market closes. Additionally, once you reach a set profit threshold—called the buffer zone—the drawdown will no longer trail and becomes fixed at the original account balance.
Drawdown Levels by Account Size:
50K Account: $2,000 max drawdown (drawdown stops trailing once you reach $52,000)
100K Account: $3,000 max drawdown (drawdown stops trailing once you reach $103,000)
150K Account: $4,500 max drawdown (drawdown stops trailing once you reach $154,500)
Example with a 50K Account:
Let’s say you have a 50K account with a $2,000 maximum loss limit. Here’s how the End-of-Day Drawdown works:
Starting Drawdown:
Your starting max drawdown level is $48,000 (50,000 - 2,000).
If your account balance drops to $48,000, your account is breached.
Intraday Gains or Losses:
During the trading day, any gains or losses—whether realized or unrealized—do not affect the drawdown until the end of the day.
For example, if you make $1,000 (realized or unrealized) during the day, your drawdown remains at $48,000 until the market closes.
End-of-Day Balance and Adjustments:
At the end of the trading day (5:00 pm EST), your account’s balance is locked in, and the drawdown level adjusts based on this end-of-day balance.
If you close the day with a balance of $52,000, the drawdown will adjust up to $50,000 (52,000 - 2,000) when the market reopens at 6:00 pm EST.
Reaching the Buffer Zone (Static Drawdown):
Once you reach the buffer zone (account balance of $52,000 in a 50K account), your drawdown becomes static at $50,000.
This means your drawdown will no longer trail, even if you make further profits. For example, if your balance grows to $60,000, the drawdown stays fixed at $50,000.
Benefits of End-of-Day Drawdown
Increased Intraday Flexibility: The drawdown only updates at day’s end, giving you more freedom to let trades run during the day without impacting your max loss level.
Fixed Risk Level in the Buffer Zone: Once your account reaches the buffer zone, your drawdown stops trailing. This allows you to keep any additional gains without risking a higher trailing limit, providing stability as your account grows.
This structure encourages growth while giving you more control over your intraday trades and providing stability when you reach the buffer zone.