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Smart Drawdown

Updated over 2 weeks ago

At FundedSquad, protecting your capital while giving you room to grow is our top priority. Smart Drawdown is a hybrid loss-limit system that begins as a trailing drawdown and then permanently locks once a set profit threshold is reached. This mechanism rewards consistent gains while providing a fixed safety net after you have proven early profitability.


How Smart Drawdown Works

The Smart Drawdown starts at 6% of the account’s starting balance, just like a trailing drawdown. As your account equity increases, the drawdown tightens—reducing the maximum allowable loss by the same percentage as your unrealised profit.

Once your equity reaches a 3% profit from the starting balance, the drawdown locks permanently at 3% of the starting balance. After this point, the loss limit no longer trails—even if you grow the account further, make withdrawals, or reset the account.

This gives you the flexibility of a trailing drawdown in the early stages and the security of a fixed drawdown once you’ve established initial profits.


Accounts Using Smart Drawdown

Account Type

Smart Drawdown

Squad Instant Funded

6%


Example 1: $25,000 Instant Account

  • Starting Balance: $25,000

  • Initial Drawdown (6%): $1,500

  • Initial Maximum Drawdown Figure: $25,000 – $1,500 = $23,500

Trade Scenario 1:
The trader makes a 2% unrealised profit ($500).

  • New Equity: $25,500

  • Trailing Drawdown: 6% – 2% = 4%

  • New Drawdown Amount: 4% of $25,000 = $1,000

  • New Drawdown Limit: $25,000 – $1,000 = $24,000

Trade Scenario 2:
The trader reaches a 3% profit ($750).

  • New Equity: $25,750

  • Locked Drawdown: 3% of $25,000 = $750

  • Permanent Drawdown Limit: $25,000 – $750 = $24,250

From this point onward, the drawdown is fixed at $24,250, regardless of future profits or withdrawals.


Example 2: $50,000 Instant Account

  • Starting Balance: $50,000

  • Initial Drawdown (6%): $3,000

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

Trade Scenario 1:
The trader makes a 2.5% unrealised profit ($1,250).

  • New Equity: $51,250

  • Trailing Drawdown: 6% – 2.5% = 3.5%

  • New Drawdown Amount: 3.5% of $50,000 = $1,750

  • New Drawdown Limit: $50,000 – $1,750 = $48,250

Trade Scenario 2:
The trader reaches a 3% profit ($1,500).

  • New Equity: $51,500

  • Locked Drawdown: 3% of $50,000 = $1,500

  • Permanent Drawdown Limit: $50,000 – $1,500 = $48,500

Once the 3% profit threshold is reached, the drawdown stays permanently locked at $48,500, ensuring consistent protection while letting you scale your profits.


Proper management within the Smart Drawdown framework ensures your trading account remains compliant while safeguarding profits.
For questions, contact support@fundedsquad.com.

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