Drawdown
In trading, drawdown refers to the decline in an account's equity from its highest value to its lowest point during a specific period. It is an important metric for measuring risk and the extent of losses in a trading account.
To calculate drawdown, subtract the lowest equity value from the highest equity value observed. Then, divide this difference by the highest equity value and multiply by 100 to express it as a percentage.
For example, if the highest equity value is $10,000 and the lowest is $8,000, the drawdown would be 20%. This indicates a 20% reduction in equity from the peak.
Understanding drawdowns helps traders evaluate the risk of their strategies and their ability to recover from losses.
We keep a close eye on your PnL (profit and loss) to ensure you're sticking to our trading conditions. Here’s why monitoring drawdown is key:
Risk management – keeps your trades under control and avoids any unexpected surprises.
Performance evaluation – to get a sense of your trading performance and long-term potential.
Long-term viability – monitoring helps us make sure you're set up to succeed over time.
Our drawdowns is "Equity based" calculated
The difference between Maximum daily Drawdown and Maximum total Drawdown is:
- Daily drawdown limit is a percentage of the previous day's equity summary.
- Maximum Drawdown is a fixed percentage of the initial balance.
The maximum daily drawdown limit is a percentage of the previous day's equity snapshot and it is 5%, here's the formula you have to use to calculate it:
Previous Day's Equity × Limit % / 100
Your Account’s equity loss during the day must not exceed this limit.
The Maximum Drawdown is a fixed % of the initial balance and it is 10%, here's the formula you have to use to calculate it:
Initial Balance × Limit % / 100
Your Account’s balance or equity must not fall below this limit.