What is Maximum Drawdown? | "Unlimited" challenge

Maximum drawdown is the maximum amount that you're allowed to lose before you hard breach your account.

When you open the account, your Max Drawdown is set at 10% of your starting balance for a 2-Phase "Unlimited" challenge.

This article explains how the maximum drawdown works in detail, but to make it simple, there are 3 things you need to keep in mind.

The maximum DD is:

trailing
locks in at starting balance upon the initial payout on a Funded account or when you reach the same amount in profit as your Max DD level.
calculated based on the highest recorded balance for the duration of the phase

Let’s learn more about the trailing drawdown here:

🔹 Example #1: You have a 100k account and are trading on Phase 1, and your maximum drawdown is $10,000. If you lose $10,000, your account will be breached.

🔹 Example #2: You have a 10k account and are trading on Phase 1.
After closing a position in profit, your balance increased to $10,300. Since this is your new high-water mark, your maximum drawdown is now updated to $9,300. The next day, you lost $300, reducing your balance to $10,000. However, your maximum drawdown remains at $9,300 because it's calculated from your highest recorded balance.

📍Important: Max DD level is updated automatically every time after your balance sets a new high. The Max DD level breaches if your equity drops below the specified amount.

The calculation formula

For a 5k 2-Phase account, the maximum drawdown can be calculated using this formula:

highest recorded balance - $500 = maximum drawdown.

For a 10k 2-Phase account:

highest recorded balance - $1000 = maximum drawdown.

For a 25k 2-Phase account:

highest recorded balance - $2500 = maximum drawdown.

For a 50k 2-Phase account:

highest recorded balance - $5000 = maximum drawdown.

For a 100k 2-Phase account:

highest recorded balance - $10000 = maximum drawdown.

For a 200k 2-Phase account:

highest recorded balance - $20000 = maximum drawdown.

📍Important: Unlike maximum drawdown, your maximum daily loss does not trail and remains static for the duration of the challenge. Visit this page to learn more about the max daily loss rule.

Now let’s check what the lock upon payout rule means:

🔹 Example #1: You have a 10k 2-Phase Funded account, and your maximum drawdown is $1000. If you make $1200 in profit (+12%) on a Funded account and withdraw them all at once, your account will be breached because your maximum drawdown locks upon your starting balance ($10,000) at the first payout.

💡Our tip: to keep your account active, you must maintain a buffer between the starting and remaining balance after the payout.

🔹 Example #2: You have a 10k 2-Phase funded account, and your maximum drawdown is $1000. You made $1200 in profit (+12%) and withdrew 600$ (6%). Your balance will become $10600, and you now have a 6% buffer before breaching the account. That’s because your maximum DD was locked at your starting balance upon the first payout. If you continue to generate profits after this, your maximum DD will grow as well!

How to track your Maximum Drawdown

Maximum Drawdown, along with our trading objectives, can be tracked on your trading dashboard. It's highly advisable to check them at least once per day to stay on top of your loss limits and profit targets.