The Maximum Daily Drawdown Limit is 4% of the Initial Balance.
Example 1:
For a $100,000 2-Step Plus Account, the Daily Drawdown is 4% of the Initial Balance.
Day 1:
Starting Balance/Equity: $100,000
Allowed Daily Drawdown: 4% of $100,000 = $4,000 (stop-out limit = $96,000)
Example 2:
Day 2:
End of Day Balance (Day 1): $104,000
End of Day Equity (Day 1): $103,000
At 5 PM EST, if unrealised positions are open, then 4% of Initial Balance will be deducted from the higher of the two.
In Example 2 above, since Balance is higher than Equity, the stop-out limit will become:
$104,000 – (4% of $100,000) = $104,000 – $4,000 = $100,000
If either Equity or Balance reaches this limit, it would result in a breach of the Daily Drawdown Limit.
Example 3:
Day 3:
End of Day Balance (Day 2): $101,000
End of Day Equity (Day 2): $106,000
In Example 3 above, since Equity is higher than Balance, the stop-out limit will become:
$106,000 – (4% of $100,000) = $106,000 – $4,000 = $102,000
Since the Balance of $101,000 is lower than the limit of $102,000, this will cause an immediate breach of the Daily Drawdown Limit.
Breaching this limit will cause the account to be violated, closed and disabled for trading.
How Does the Maximum Daily Drawdown Limit for the 2-Step Plus Account Work?
Written by Support