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.
Maximum Overall Drawdown: 2-Step Account
Setup: The Maximum Drawdown is fixed at 8% of your starting balance and does not trail or adjust with account performance.
Example:
Starting Balance: $100,000
Maximum Drawdown: $92,000 (8% below starting balance).
This limit remains static throughout the account's lifetime, and exceeding it will result in a breach.