Understanding the Drawdown Mode in Instant Sim Funded Accounts
Our drawdown rules ensure a fair and transparent trading environment while protecting traders from excessive losses. This article explains how the Daily Drawdown and Max Trailing Drawdown operate.
Daily Drawdown: Based on End-of-Day Balance
The Daily Drawdown is designed to limit your potential loss within a single trading day. Here’s how it works:
Calculation:
The daily drawdown is set at 2.5% of your account balance.
This amount represents the maximum you can lose in a single day.
End-of-Day Balance Rule:
The daily drawdown is assessed based on your account’s end-of-day balance. This means:
If your losses for the day exceed the drawdown limit, trading will be paused for the remainder of the day (a soft breach).
You can resume trading the next day as long as your account remains above the Max Trailing Drawdown limit.
Example:
$50,000 Account: Daily Drawdown = $1,250 (2.5%).
If the balance at the end of the day is below $48,750, trading will pause until the next day.
Max Trailing Drawdown: Max Trailing Drawdown (Based on End-of-Day Highest Closed Balance)
Your Max Trailing Drawdown ensures you maintain a sustainable trading approach while scaling your account. Here are the details:
Definition:
Your Max Trailing Drawdown is set at 4% of your account’s initial balance. It adjusts once daily, based on your highest end-of-day (EOD) closed balance.
How It Works:
The trailing drawdown is based on your end-of-day (EOD) balance, not your intraday performance. Even if you close trades during the day, the drawdown will only trail up based on your balance at the market close (5PM ET).
If this EOD balance exceeds your previous highest balance, your trailing drawdown level moves up accordingly.
Your trailing drawdown level never moves downward; it stays fixed at the highest level reached.
Breach Condition:
If your account balance falls below the trailing drawdown level, your account is considered breached, and trading will stop.
Example:
$100,000 Account:
Initial Trailing Drawdown = $4,000.
If the highest closed balance is $105,000, the trailing drawdown moves to $101,000.
If the balance drops below $101,000, the account breaches the trailing drawdown limit.
When Does the Drawdown Stop Trailing?
For Instant Funding accounts, the trailing drawdown will stop trailing and lock in once you've made enough profit to cover the full drawdown plus a $100 buffer. At that point, your drawdown locks at your starting balance + $100 and no longer moves up or down.
For example:
On a $25,000 account, once your balance reaches $26,100, the drawdown locks at $25,100.
On a $50,000 account, once your balance reaches $52,100, the drawdown locks at $50,100.
On a $100,000 account, once your balance reaches $104,100, the drawdown locks at $100,100.
On a $150,000 account, once your balance reaches $156,100, the drawdown locks at $150,100.
This gives traders room to manage risk once they’ve proven some consistency early on.