How do you calculate the Max Drawdown?
In proprietary trading, Maximum Drawdown (MDD) is a crucial risk management parameter that determines how much your account can decline before breaching the rules. At TradeXProp, we utilize two types of Maximum Drawdown models: Static Drawdown and Trailing Drawdown. Understanding these differences is essential for effective risk management in your Funded Account.
How to Calculate Static Drawdown
Your Maximum Drawdown is set as a fixed percentage of your starting balance.
It does NOT increase as your account grows.
It remains at the same value as long as the account is active.
Example of Static Maximum Drawdown
For Forex and Crypto Evaluation Accounts, the drawdown percentages are as follows:
If you have an X-1 Step Account with a $100,000 starting balance, your Maximum Drawdown is set at $94,000 (6% drawdown).
If your closed balance increases to $102,000, your Maximum Drawdown remains at $94,000—it does NOT move.
For the X-2 Step Account:
With a $100,000 balance, your Maximum Drawdown is $91,000 (9% drawdown).
Even if your account grows to $110,000, your Maximum Drawdown remains fixed at $91,000.
No matter how much profit you make, the Maximum Drawdown remains at the initial calculated level.
How to Calculate Trailing Drawdown
Your Maximum Drawdown starts at a set percentage of your starting balance.
It moves up as your closed balance reaches new highs.
Once your account reaches an 8% gain, the drawdown locks at your starting balance.
Example of Trailing Maximum Drawdown
For Instant Funded Accounts, the Trailing Maximum Drawdown is set at 8%.
If you start with a $100,000 account, your Maximum Drawdown is $92,000 (8% drawdown).
If your account increases to $102,000, your new Maximum Drawdown is $94,000.
If your account increases to $108,000, your Maximum Drawdown moves to $100,000 and locks in place.
If your account reaches $170,000, your Maximum Drawdown remains at $100,000, meaning if your account drops back to that level, it would breach.
Once the trailing drawdown locks in at the starting balance, it no longer moves.
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