# Max Trailing Drawdown

**Max Trailing Drawdown** - it's a maximum account drawdown. It is being trailed as you earn profits. It is calculated intraday. **Max Trailing Drawdown** stops moving when your account balance (including Max Trailing drawdown) becomes equal to your initial account balance. This is best demonstrated in the picture below. Please note, all commissions and fees are included in the **Max Trailing Drawdown**.

**This number is calculated at the end of the trading day.**

**Please note: on some holidays trading results for two days will be counted as 1 trading day.**

Until you have traded your first trading day, the minimum account balance equals the initial account balance minus maximum trailing drawdown. Each time the maximum account balance is updated at the time the market closes, the value of the minimum account balance for the next trading day increases. If the maximum account balance stays the same as the previous day, then the minimum account balance does not change.

The minimum account balance is calculated as follows: the new maximum account balance minus the previous maximum account balance. We attached an image and a detailed description of how this happens each trading day at the end of this article.

When the value of the minimum account balance reaches the initial account balance, the Max trailing drawdown is fixed at this level and does not change anymore *. The table below shows the values of the account balance when the Max trailing drawdown stops moving, for each account size.

* An important note for funded session traders.

Account size | $10,000 | $30,000 | $50,000 | $100,000 | $150,000 |

When Max Trailing Drawdown stops moving | $10,500 and above | $31,500 and above | $52,000 and above | $103,000 and above | $154,500 and above |

If the account falls below the minimum account balance calculated against Max Trailing Drawdown, this will be a violation of the Max Trailing Drawdown rule. Therefore, all your current trades will be closed, and the account will be blocked.

You can make a Restart of your Practice Session

You can also Restart your Qualifying Session

The value of the Max Trailing Drawdown for the next trading day is calculated on the basis as the ending account balance as the current trading session has been closed. This is true for the Practice, Qualifying and Funded Session.

A rule check is not the same as a Max Trailing Drawdown calculation. When we check the Max Trailing Drawdown, we verify whether the account has dropped below the minimum account balance.

At the Practices stage, the Max Trailing Drawdown rule is checked every day, at the end of the trading session. It means that **during the day **your account balance may fall below the minimum account balance, but **by the end of the trading day**, the account balance must be higher than the minimum account balance, otherwise the rule will be considered violated. Also, keep in mind that you cannot exceed the daily loss limit. During **Qualifying **and **Funded **sessions, your **Max Trailing Drawdown** this rule is verified **intra-day in real-time**. That is, your account balance can NOT fall below the minimum account balance **during the trading day**, as the rule is checked in real-time.

The chart shows the values of the minimum possible account balance (red line) and account balance (blue chart) at the time of the trading day open. Therefore, all profits and losses this trader received affected the minimum possible account balance and for the current and the following day.

Now let's go into detail for each trading day you can see on the image above**trading day 1:** since the trading has not yet begun, we will calculate the minimum account balance before opening the market: $ 100,000 (initial account balance) - $ 3,000 (maximum trailing drawdown for an account of $ 100K) = $ 97,000 (minimum account balance).

At the end of day 1, the trader had a $ 500 loss. This is reflected on the next day's balance which is calculated once the previous day's market was closed.

**trading day 2**: The starting account balance for day 2 is: $ 100,000 (initial account balance) - (minus) $ 500 (loss on the previous trading day) = $ 99,500.

The value of the minimum account balance has not changed and remained at the previous day level of $ 97,000. This is because the maximum account balance has not been updated.

A profit of $1000 was generated for this trading day.

**trading day 3**: Because of the previous day's $ 1,000 profit, the maximum account balance has gone up after the day 2 close. The account balance can be calculated as follows $ 99,500 (account balance of the previous day) + $ 1,000 (profit for the second trading day) = $ 100,500.

Since there's a new account balance maximum, we can now calculate a new account balance.

$ 100,500 (new maximum account balance) - $ 100,000 (previous value of the maximum account balance) = $ 500 (the value by which the minimum account balance will be increased).

Therefore, the new minimum account balance is: $ 97,000 (old value of the minimum account balance) + $ 500 = $ 97,500. This new value of the minimum account balance takes effect and a new trading day begins.

An income of $ 1,500 was generated for this trading day.

**trading day 4: **Due to the previous day's profit of $ 1,500 was received, the account balance updated its maximum after the market closed on the third day. The starting account balance for day 4 is $ 100,500 (account balance of the previous day) + $ 1,500 (income for the second trading day) = $ 102,000.

The new minimum account balance has gone up similar to day 3: $ 102,000 (new maximum account balance) - (minus) $ 100,500 (previous value of the maximum account balance) = $ 1,500 (the value by which it will be increased).

Therefore, the minimum account balance is this: $ 97,500 (old value of the minimum account balance) + $ 1,500 = $ 99,000. The new value of the minimum account balance takes effect and a new trading day begins.

For this trading day, a loss of $ 1,000 was received.

**trading day 5:** on the fourth trading day, a loss of $ 1,000 was received, that is, the account balance before trading is: $ 102,000 (account balance of the previous day) - ( $ 1,000 (loss for the fourth trading day) = $ 101,000.

The value of the minimum account balance has not changed and remained at the level of the previous day at $ 99,000, since the maximum account balance has not been updated.

Please note: the difference between the account balance and the minimum account balance is equal to the daily loss limit. Sometimes the minimum account balance calculated on the basis of the Max Trailing Drawdown rule can be HIGHER than the minimum account balance calculated on the basis of the Daily Loss limit rule. In this case, your minimum account balance depends on what stage you are on:

1) If you are trading the Practice Session, the minimum account balance (based on Max Trailing Drawdown) is calculated** at the end of the trading day** and **may **be exceeded during the trading day. However, remember not to exceed the Daily loss limit, as it is checked real-time

2) If you are trading the Qualifying or Funded Session, the minimum account balance (based on Max Trailing Drawdown) is calculated in **real-time **during the day and **may not **be exceeded during the trading day. Plus, the Daily loss limit is calculated real-time as well

A profit of $ 2,500 was generated for this trading day.**trading day 6**: on the fifth trading day, A profit of $ 2,500 was received, due to which the maximum account balance updated after the market closed on the fifth day. The starting account balance for day 6 is: $ 101,000 (account balance of the previous day) + (plus) $ 2,500 (income for the fifth trading day) = $ 103,500.

Since there's a new account balance maximum, we can now calculate a new account balance.

$ 103,500 (new maximum account balance) - $ 102,000 (previous value of the maximum account balance) = $ 1,500 (the value by which the minimum account balance will be increased).

Now when we calculate the new minimum account balance, we must remember that __it cannot be higher than the initial account balance __($100,000). So our calculation goes: $ 99,000 (old value of the minimum account balance) + $ 1,500 = $ 100,000 (the initial balance value, not $100,500). This new value of the minimum account balance takes effect and a new trading day begins.

The rest of the trading days are not calculated since the minimum account balance no longer changes.

Customer support service by UserEcho

## Replies 0