What does the Maximum Trailing Drawdown mean?

The Maximum Trailing Drawdown is initially set at a specific % and trails (using CLOSED BALANCE – NOT equity) your account until you have achieved a pre-defined % return in your account. Once you have achieved the % return, the Maximum Trailing Drawdown no longer trails and is permanently locked in at your starting balance.

If your starting balance is $100,000, you can drawdown to $94,000 before you would violate the Maximum Trailing Drawdown rule. Then for example let’s say you take your account to $102,000 in CLOSED BALANCE. This is your new high-water mark, which would mean your new Maximum Trailing Drawdown would be $96,000. Next, let’s say you take your account to $106,000 in CLOSED BALANCE, which would be your new high-water mark. At this point your Maximum Trailing Drawdown would be locked in at your starting balance of $100,000. For example, if you take your account to $120,000 and you have not scaled up, as long as you do not drawdown more than 4% (in Simplex plan) in any given day, you would only breach if your account equity reaches $100,000.