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Daily Drawdown

Updated over 2 weeks ago

What is Daily Drawdown?

Daily Drawdown is a risk management rule that limits the maximum loss you can incur in a single trading day. At FundedSquad, it is calculated using the higher value between your account balance and your account equity at the start of a new trading day, ensuring traders are protected even if open trades fluctuate during the day.


Daily Drawdown Limits by Account Type

Account Type

Daily Drawdown

Instant Funded Accounts

3%

2 Step Fast Evaluation

4%

2 Step Squad Evaluation

5%

1 Step Evaluation

3%


How Daily Drawdown Works

  1. Calculation:
    The daily drawdown is based on the highest value between your account balance and account equity at any point during the day. Losses are tracked against this value to determine if the daily limit is exceeded.

  2. Violation Consequences:

    • Exceeding the daily drawdown results in account disqualification.

    • Daily drawdown violations are considered serious because they indicate excessive risk-taking.

  3. Purpose:
    Daily drawdown rules help traders stay disciplined, manage risk and ensure long term sustainability of their funded accounts.


Example Scenario

  • Account Type: 2 Step Fast Evaluation

  • Daily Drawdown Limit: 4%

  • Account Balance: $50,000

  • Equity at End of Day: $52,000

The daily drawdown in a new trading day is calculated on $52,000 (the higher of balance or equity). The maximum allowable loss for the day is $2,080 (4% of $52,000). Any losses beyond this amount will be considered a violation.

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