Two-Step Challenge Drawdowns
"Daily Drawdown" is a critical rule and it's set at either 4% of your initial account balance, or at the amount you customize during your challenge purchase. The sum of all your positions (both closed and open) for the day must not hit or exceed this "Daily Drawdown". If you end the day with losses totaling more than this limit, it's considered a rule violation.
Importantly, the "Daily Drawdown" moves in sync with the initial balance of each new trading day.
The "Max Drawdown" feature works a bit differently. Unlike "Daily Drawdown", which resets daily, "Max Drawdown" takes into account all your open and closed profits/losses over time.
If your cumulative losses ever exceed 8% of your initial account balance (or the amount you chose when you purchased your challenge), it's considered a violation.
Both "Daily Drawdown" and "Max Drawdown" rules take into account any commissions and swaps associated with your trading.
In essence, these rules aim to manage risk and promote consistent, reliable trading while mitigating the chances of a significant account drawdown. They encourage discipline and help ensure that even after a bad day, you're still in a position to trade another day.
As we know, that description without real examples could be confusing, let check 3 scenarios in more detail:
Scenario 1 - Profit without crossing Daily Drawdown
The user makes a profit of $2,000 on Day 1. The account balance becomes $102,000, and the Max Daily Drawdown for Day 2 is now 4% of $102,000, which is $4,080. The Max Drawdown remains at $8,000. The user has not violated any rules and continues trading.
Scenario 2 - Profit after crossing Daily Drawdown but not Max Drawdown
On Day 1, the user makes a loss of $6,000, crossing the Daily Drawdown limit. This constitutes a rule violation and typically, the account will be terminated, despite the fact that the Max Drawdown has not been breached.
Scenario 3 - Loss without crossing Daily Drawdown
The user makes a loss of $2,000 on Day 1. The account balance is now $98,000, and the Daily Drawdown for Day 2 is $3,920 (4% of $98,000). The Max Drawdown remains at $8,000. The user has not violated any rules and continues trading.
Finally, let us once again point out that:
Calculation takes into account closed and open positions
Daily Drawdown is reset every midnight (Summer server time: GMT+3, Winter server time GMT+2)
One-Step Challenges: Trailing Max Drawdown
In our One-Step challenges (also 1-STEP PRO), the Max Drawdown is "Trailing", which means that it is calculated differently than the regular Max Drawdown on Two-Step challenges.
The Trailing Max Drawdown works like this:
The breach percentage tracks the highest balance ever recorded on that particular challenge and is calculated from that value. For example, if you purchased a One-Step challenge with Max Drawdown of 6%, and started on a $100,000, and your highest balance on the challenge was $104,000, that moves the breach level of this rule to $97.760 (6% down from $104,000).
The breach level never moves above your initial balance. So, in our $100,000 scenario, even if your highest balance was $107,000, the breach level would be $100,000 and never more than that.
When you withdraw profits, your Trailing Max Drawdown on that account is affected by the withdrawal and the resulting balance change. That means that if by the withdrawal you exceed the current Trailing Drawdown limit, that will result in a breach.
Here we will see more detailed examples:
Example 1:
You start out with a 100k demo account. Your daily simulated drawdown is 4% and your maximum simulated trailing is 7%. Your daily simulated drawdown level is $96,000 and your maximum simulated trailing is $93,000. Let's say you make $8,000 in simulated profit. Once your demo account has made over 6% of the starting simulated balance, your trailing now locks in at $100k or $100,000. In other words, it no longer trails. Drawdown includes simulated profits and simulated losses from closed simulated positions, and charges to reflect swap fees and commissions.
Example 2:
You start out with a 100k demo account. Your daily simulated drawdown is 4% and your maximum simulated trailing is 7%. Your daily simulated drawdown level is $96,000 and your maximum simulated trailing is $93,000. Let’s say you make $5,000 simulated profit. This puts your demo account at $105,000. The next day your daily simulated drawdown will be $105,000 - 4% = $4,200. Your daily simulated drawdown level is $100,800. Your maximum simulated trailing drawdown is $105,000 - 7% = $7,350. Your new maximum simulated trailing drawdown is $97,650, because it trails from your highest recorded simulated balance which was $105,000.
Daily Drawdown is reset every midnight (Summer server time: GMT+3, Winter server time GMT+2). Maximum simulated trailing will always be calculated from highest recorded balance unless you achieve 7% from your starting simulated balance.
How Simulated Drawdown affects Payouts for 1Step and 1Step PRO Accounts:
Example 1:
You begin with a $100,000 demo account. Your daily simulated drawdown is 4% and your maximum simulated trailing drawdown is 7%. Your daily simulated drawdown level is $96,000 and your maximum simulated trailing drawdown level is $93,000. Let's say you earn a simulated profit of $8,000. You request a withdrawal payout of $6,000. Since your demo account reached 7%, your maximum simulated drawdown is locked in at $100,000. This now leaves you with only 2% for maximum simulated drawdown.
Example 2:
You start with a $100,000 demo account. Your daily simulated drawdown is 4% and your maximum simulated trailing drawdown is 7%. Your daily simulated drawdown level is $96,000 and your maximum simulated trailing drawdown level is $93,000. Let's say you earn a simulated profit of $15,000. You request a withdrawal payout of $8,000. Since your demo account reached 7%, your maximum simulated drawdown is locked in at $100,000. You now have a buffer of $7,000 until the maximum simulated drawdown at $100,000.
Example 3:
You begin with a $100,000 simulated account. Your daily simulated drawdown is 4% and your maximum simulated trailing drawdown is 7%. Your daily simulated drawdown level is $96,000 and your maximum simulated trailing drawdown level is $93,000. Let's say you earn a simulated profit of $6,000. You request a withdrawal payout of $6,000. Since your demo account reached 7%, your maximum simulated drawdown is locked in at $100,000. You will have failed your account challenge because you left no buffer, and your demo account has reached the maximum simulated drawdown.
Example 4:
You start with a $100,000 simulated account. Your daily simulated drawdown is 4% and your maximum simulated trailing drawdown is 7%. Your daily simulated drawdown level is $96,000 and your maximum simulated trailing drawdown level is $93,000. Let's say you earn a simulated profit of $4,000. If you request a withdrawal payout of $4,000, please note that your maximum trailing simulated drawdown will not be reset and will still remain at 7% of your highest recorded simulated balance.