Drawdown refers to the decrease in the balance in a trading account from its previous high. Drawdowns are usually expressed as a percentage, but can also be expressed in dollars.
Each account has a different drawdown that allows the trader to manage his risk and withstand the possible natural negative periods that occur. The EOD drawdown is updated and increases at the end of the day, taking into account the balance at the end of the trading day. 📉💰
Example:
For a 25k account, the Drawdown will be $1,000 i.e. the trader will not be able to take his account below $24,000 at the start of trading period:
Day 1 +$100 balance $25,100, your new Drawdown is: $24,100
Day 2 +$200 balance $25,300, your new Drawdown is: $24,300
Day 3 +$500 balance $25,800, your new Drawdown is: $24,800
Day 4 +$150 balance $25,950, your new Drawdown is: $24,950
Once the Drawdown reaches the starting balance of the account, it will not move any further from this point:
Day 5 +$150 balance $26,100, your new Drawdown is: $25,000
Day 6 +$900 balance $27,000, your new Drawdown is: $25,000
💵📉 The EOD Drawdown remains in the balance where it is or rises, it never goes back, it works equally in evaluation and in Live accounts and will always remain active. You will lose your account if you reach it at any time.
