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Trailing Drawdown

Updated over 2 weeks ago

At FundedSquad, protecting your capital while allowing your profits to reduce risk is a key priority. Trailing drawdown is a dynamic loss limit that adjusts as your account makes profits, but locks at the initial account balance. Once this lock is reached, the drawdown no longer decreases, even after withdrawals or account resets.

How Trailing Drawdown Works

Trailing drawdown refers to the dynamic adjustment of a trader’s maximum allowable loss based on the highest equity point reached during trading. The key difference in this model is that every percentage of profit you make is subtracted from your initial drawdown limit (6% in this case), until the drawdown reaches your initial account balance. Once the drawdown reaches this level, it locks and no longer adjusts (even after withdrawal or account reset).

Accounts Using Trailing Drawdown

Account Type

Trailing Drawdown

Instant Lite

6%

1-Step Evaluation

6%

Example

Let’s assume your Instant Lite Account is $50,000, and the trailing drawdown limit is 6%:

  • Initial Drawdown: 6% of $50,000 = $3,000

  • Initial Maximum Drawdown Figure: $50,000 - $3,000 = $47,000

Trade Scenario:

The trader makes a profit of $1,500 (3% of the account). The trailing drawdown adjusts accordingly:

  • New Drawdown Limit = Initial Drawdown - Profit %

  • 6% - 3% = 3%

  • New Drawdown Amount = 3% of $50,000 = $1,500

  • New Maximum Drawdown Limit = $50,000 - $1,500 = $48,500

Once the drawdown reaches the initial account balance, it locks.

Proper management within your trailing drawdown ensures your trading account remains compliant while locking in your profits.

For questions, contact support@fundedsquad.com.

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