Understanding the Max Smart Drawdown in Our Instant Funding Program
1. What is the Max Smart Drawdown?
The Max Smart Drawdown is the maximum loss you can incur from the highest equity point your account has reached. It starts at 8% of your initial balance and adjusts as your account's equity increases.
2. How is the Max Smart Drawdown calculated on my account?
Let's break it down with an example:
• Initial Setup:
If you have a $50,000 account, your initial Max Drawdown (DD) level is set at $46,000. This means you can afford to lose up to $4,000 from your starting balance.
• Example of Drawdown Adjustment:
Suppose you manage to grow your account's equity to $51,000. The Max Drawdown level will now be recalculated based on the highest equity point. Since the Max Drawdown is 8% of the initial balance, the new Max Drawdown level would be $47,000 (which is $51,000 - $4,000). This means your new maximum permitted loss is $4,000 from the highest equity reached.
3. Does the Max Drawdown level always move?
The Max Drawdown level adjusts as long as your account's equity increases and it never moves when your equity decreases. However, once you hit a profit of 4% or more of the initial balance, the Max Drawdown level will lock at -4% of the initial balance and will not move again, regardless of any further increases in equity.
4. What happens when I reach 4% profit?
When your account's profit reaches 4% of the initial balance, the Max Drawdown level locks in at -4% of the initial balance forever, unless scaling target is reached, in that case the new account will restart with Max DD level at -8% from the initial balance.
• Example:
Continuing with the $50,000 account example, once your equity reaches $52,000 (4% profit), your Max Drawdown will lock at $48,000 (which is $52,000 - $4,000). From this point onward, no matter how much your equity grows, your Max Drawdown level will remain at $48,000.
5. Can you summarize how the Max Smart Drawdown works?
• Your Max Drawdown starts at 8% of your initial balance (e.g., $46,000 on a $50,000 account).
• The Max Drawdown adjusts as your account's equity grows, allowing you to risk 8% of the initial balance from the highest equity reached.
• Once your account gains 4% profit from the initial balance, the Max Drawdown locks at -4% of the initial balance and will no longer adjust.
6. What happens if my account’s equity drops below the Max Drawdown level?
If your account's equity falls below the Max Drawdown level, your account will be closed, as it has exceeded the allowed loss limit.
7. Why does the Max Drawdown lock at 4% profit?
The drawdown locks at this level to protect both the trader and the firm while allowing you to keep trading with a fixed risk level. It provides a balance between giving you room to grow your account and maintaining risk management.
8. How can I monitor my Max Drawdown level?
You can track your Max Drawdown level in your trading dashboard, where it will be updated as your equity changes. The locked level will also be clearly displayed once it has been reached.