1-Step Challenge:
The maximum allowable daily loss is 3% of the account balance. To calculate the daily drawdown, the following procedure is adopted: Each day at the transition time of 12am CEST, we assess both the account balance and account equity, selecting the greater of these two values. From this selected value, a fixed rate of 3% of the account balance is deducted to set the limit for permissible daily loss for the next trading day. This method ensures that trading limits are both clearly defined and consistently applied, safeguarding against excessive risk and potential significant loss.
Example 1: Consider a $100,000 account where, at 12am CEST, there is an open trade showing a floating profit of $2,000, making the account equity $102,000. With a 3% daily drawdown rule, the equity must not fall below $98,940 on the next trading day ($102,000 - $3,060 = $98,940).
Example 2: On the same $100,000 account, if at 12am CEST there is an open trade with a floating loss of $2,000, the account equity would be $98,000. Since the original balance of $100,000 is higher than the current equity of $98,000, the 3% daily drawdown limit will be calculated based on the $100,000 balance. Thus, for the next trading day, the equity must not fall below $97,000 ($100,000 - $3,000 = $97,000).
Example 3: If there are no open trades at 12am CEST, the daily drawdown will simply be 3% of whatever the account balance is at that time.
2-Step Challenge:
The maximum allowable daily loss is 5% of the account balance. To calculate the daily drawdown, the following procedure is adopted: Each day at the transition time of 12am CEST, we assess both the account balance and account equity, selecting the greater of these two values. From this selected value, a fixed rate of 5% of the account balance is deducted to set the limit for permissible daily loss for the next trading day.
Example 1: Consider a $100,000 account where, at 12am CEST, there is an open trade showing a floating profit of $2,000, making the account equity $102,000. With a 5% daily drawdown rule, the equity must not fall below $97,000 on the next trading day ($102,000 - $5,100 = $96,900).
Example 2: On the same $100,000 account, if at 12am CEST there is an open trade with a floating loss of $2,000, the account equity would be $98,000. Since the original balance of $100,000 is higher than the current equity of $98,000, the 5% daily drawdown limit will be calculated based on the $100,000 balance. Thus, for the next trading day, the equity must not fall below $95,000 ($100,000 - $5,000 = $95,000).
Example 3: If there are no open trades at 12am CEST, the daily drawdown will simply be 5% of whatever the account balance is at that time.