The 2-Step Standard Evaluation has a fixed Daily Drawdown Limit of 4%, based on the initial balance, and does not adjust with changes in Balance or Equity.
Example 1:
Account Size: $100,000
Daily Drawdown Limit: $4,000
Day 1:
Starting Balance/Equity: $100,000
Daily Drawdown: $4,000
Stop-Out Limit: $96,000 ($100,000 – $4,000)
Day 2:
Starting Balance/Equity: $104,000
Daily Drawdown: $4,000
Stop-Out Limit: $100,000 ($104,000 – $100,000)
Example 2:
End of Day 1 Balance: $104,000
End of Day 1 Equity: $102,000
Daily Drawdown Limit: $4,000
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 (A further $2,000 loss by Equity would breach the limit)
If either Equity or Balance reaches the limit of $100,000, it would result in the breach of Daily Drawdown.