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What are the Daily drawdown limits?

Daily Drawdown rules and limits on our 1-step and 2-step accounts.

Shanice avatar
Written by Shanice
Updated over 7 months ago

Daily Drawdown:

  • 1-Step Account: 5% of the previous day’s ending balance (resets at 5:00 PM EST).

  • 2-Step Account: 4% of the previous day’s ending balance (resets at 5:00 PM EST).

The drawdown calculation is based on the balance at 5:00 PM EST (server time), when the system resets daily. This ensures that each day’s limit is set according to the prior day’s ending balance.

Example Scenarios:

Example 1: Day 1 (2-Step Account)

  • Starting Balance: $100,000. The previous day’s ending balance at 5:00 PM EST is also $100k.

  • The daily Drawdown Limit for the Day is: 4% of $100,000 = $4,000

  • Breach limit for day 1: $100,000-$4,000 = $96,000. Your account equity cannot drop below $96,000 on Day 1.

Example 2: Day 3 (2-Step Account)

  • Previous Day’s Ending Balance (Day 2, 5:00 PM EST): $110,000

  • Daily Drawdown Limit for day 3 is: 4% of $110,000 = $4,400

  • Breach limit for day 3: $110,000-$4,400 = $105,600. For Day 3, your equity cannot drop below $105,600 ($110,000 - $4,400).

Each subsequent day’s drawdown limit is recalculated based on the previous day’s ending balance. For example, the drawdown level for Day 4 will be determined by the ending balance on Day 3 at 5:00 PM EST.

Maximum Overall Drawdown: 1-Step Account

  • Initial Setup: The Maximum Trailing Drawdown is set at 6% of your starting balance. It is calculated based on the closed balance (not equity) and trails your account until you achieve a 6% return.

  • Lock-in Point: Once you reach a 6% return, the drawdown stops trailing and is permanently locked at your starting balance.

Example:

  • Starting Balance: $100,000

  • Maximum Trailing Drawdown: $94,000 (6% below starting balance).

Scenario 1:

  • You grow your account to $102,000 in closed balance (new high-water mark).

  • Your Maximum Trailing Drawdown is now $96,000 (6% below $102,000).

Scenario 2:

  • You grow your account to $106,000 in closed balance.

  • The drawdown locks at your starting balance of $100,000 (since you’ve achieved a 6% return).

  • From here on: You would only breach this rule if your account closed balance falls back to $100,000. However, the daily drawdown rule still applies.

For instance: If your account reaches $170,000, you won’t breach the overall drawdown as long as your closed balance doesn’t fall to $100,000. However, ensure you don’t exceed the 5% daily drawdown limit.

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