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Daily drawdown

Updated over 3 weeks ago

The Daily Drawdown is designed to protect trader accounts from excessive losses within a single day by limiting the maximum loss to a specific percentage of the account’s equity or balance. This rule encourages disciplined risk management and minimizes emotional or high-risk trading behavior.

How It Works

At the end of each trading day, the system calculates your daily loss limit based on the higher of your account’s equity or balance. The next day's maximum allowable loss is then set as a percentage of this value.

Daily Drawdown Models

Account Type

Daily Drawdown Limit

2-Step Challenge

1-Step Challenge

3%

3%

Instant Funded

3%

2-Step Pro Challenge

4%

The percentage used depends on the model of your account. If you’re in the 2-Step Pro Challenge, your daily loss limit is set at 4%, not 3%.

Key Rules

  • Calculation Time: At the end of each trading day, your equity and balance are compared. The drawdown is calculated on the higher of the two values.

  • Daily Breach: If your losses in a single day exceed your allowed daily drawdown, your account will be breached and disqualified.

  • Includes Unrealized Losses: Drawdown breaches can result from both realized and unrealized losses.

Examples

Example 1: $25,000 Account (Standard 3% Drawdown)

Scenario 1 – Unrealized Profit

  • End-of-Day Equity: $26,000

  • End-of-Day Balance: $25,000

  • Higher Value: $26,000

  • Daily Drawdown Limit: 3% of $26,000 = $780

  • Next Day Max Loss Allowed: $780

Scenario 2 – Losing Trade

  • End-of-Day Equity: $24,000

  • End-of-Day Balance: $24,000

  • Higher Value: $24,000

  • Daily Drawdown Limit: 3% of $24,000 = $720

  • Next Day Max Loss Allowed: $720

Example 2: $50,000 Account (Standard 3% Drawdown)

Scenario 1 – Unrealized Profit

  • End-of-Day Equity: $52,000

  • End-of-Day Balance: $50,000

  • Higher Value: $52,000

  • Daily Drawdown Limit: 3% of $52,000 = $1,560

  • Next Day Max Loss Allowed: $1,560

Scenario 2 – Partial Loss

  • End-of-Day Equity: $48,000

  • End-of-Day Balance: $49,000

  • Higher Value: $49,000

  • Daily Drawdown Limit: 3% of $49,000 = $1,470

  • Next Day Max Loss Allowed: $1,470

Example 3: $50,000 Account (2-Step Pro – 4% Daily Drawdown)

Scenario 1 – Profit Made

  • End-of-Day Equity: $53,000

  • End-of-Day Balance: $50,000

  • Higher Value: $53,000

  • Daily Drawdown Limit: 4% of $53,000 = $2,120

  • Next Day Max Loss Allowed: $2,120

Scenario 2 – Losing Day

  • End-of-Day Equity: $48,500

  • End-of-Day Balance: $49,500

  • Higher Value: $49,500

  • Daily Drawdown Limit: 4% of $49,500 = $1,980

Next Day Max Loss Allowed: $1,980

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