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.