We lock the simulated max drawdown to ensure traders are committed to long-term, responsible trading. Here’s why:
- Encourages Long-Term Thinking: It helps ensure traders focus on consistent and manageable gains rather than aiming for quick profits.
- Promotes Responsible Trading: Traders are less likely to blow accounts when they understand their simulated drawdown is locked.
- Filters for Serious Traders: This rule helps identify traders who are committed to long-term growth and success.
- Protects Our Capital: By locking the simulated drawdown, we safeguard our capital when replicating trades from successful traders on live funds.
- If you have an initial funded account of $100,000 and you grow it to $110,000, your maximum drawdown will stay fixed at $90,000.
- However, if you decide to withdraw $5,000 (you’re free to withdraw any amount), the maximum drawdown will then lock in at $100,000.
- This adjustment leaves you with a 5% buffer, or $5,000, of drawdown room.
The simulated max drawdown is locked at your original balance once you make your first withdrawal.
This means that after a withdrawal, your balance or equity cannot go below the original balance of your account, otherwise the max drawdown will be breached, and the account will be terminated. Traders must also note that if they withdraw all of their profit in their first withdrawal, there will be no available equity to trade with, as a result the max drawdown will be breached when a new position is opened.
The Max drawdown does not trail after this point and will remain at the original balance for entirety of the funded stage allowing traders to compound their accounts over time.
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