The Max Drawdown for our Two-Step Challenge, Three-Step Challenge and their respective Master Accounts is balance-based, meaning it is fixed and does not change.
This value is calculated as a percentage of your initial account balance, and it remains constant no matter how much profit you make or how much you withdraw.
How It Works:
Since balance-based Max Drawdown is based on the initial balance, it sets a fixed threshold below which your account’s balance/equity cannot fall. Breaching this level at any time results in a hard breach of our rules and the closure of your account.
Example of balance-based Max Drawdown
Initial Account Balance: $100,000
Max Drawdown Percentage: 8%
In this case, your account balance/equity must always remain above $92,000 to not violate our rules.
Scenario 1: Profitable Trading
You have an account of $100,000.
After a few days of successful trading, your balance grows to $120,000.
Even with the increased balance, your Max Drawdown (8%) threshold remains fixed at $92,000.
If your balance falls below $92,000 at any point, you will fail the account, regardless of prior profits.
Scenario 2: Withdrawing Profits
You withdraw $10,000, reducing your account balance from $110,000 to $100,000.
Despite the withdrawal, the Max Drawdown (8%) threshold remains tied to the original balance of $100,000, so the threshold is still $92,000.