How do you calculate the Max Drawdown?

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.

Static Maximum Drawdown

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 $94,000β€”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.


Trailing Maximum Drawdown

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).

  1. If your account increases to $102,000, your new Maximum Drawdown is $94,000.

  2. If your account increases to $108,000, your Maximum Drawdown moves to $100,000 and locks in place.

  3.  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.

Notes
Note: The Maximum Trailing Drawdown only trails upward with new high-water marks. It will never decrease if the account balance/equity goes down
Warning
Important: You can still violate the Daily Drawdown Rule, even if your Maximum Trailing Drawdown hasn’t been breached.


Product Table: Static vs. Trailing Drawdown

Account Type

Maximum Drawdown Type

Drawdown Percentage

Forex X-1 Step

Static

6%

Forex X-2 Step

Static

8%

Crypto X-1 Step

Static

6%

Crypto X-2 Step

Static

9%

Instant Funded X

Trailing

8%


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