In the 2-Step Crypto Edge Evaluation, the maximum drawdown is 8% of your starting balance and follows a trailing mechanism based on the highest equity of your account. When payouts are requested, the highest equity is reduced by the payout amount requested, thereby reducing your maximum drawdown amount.
Key Points to Understand:
✔ The maximum drawdown follows a trailing mechanism, adjusting upward as your account grows.
✔ It does not decrease after losses.
✔ When a payout is requested, the highest equity used to calculate the maximum drawdown is reduced by the payout amount requested. The maximum drawdown reduces as a consequence.
Formula for Maximum Drawdown:
Maximum Drawdown Threshold = Highest Account Equity (High Water Mark) x 0.92
✔ The drawdown adjusts upwards as new highs are reached.
✔ If your equity falls below the maximum drawdown level at any time, your account is breached.
✔ The drawdown adjusts lower when a payout is requested.
EXAMPLES
Example 1 – Starting a New Account
You start with a $100,000 account.
Your maximum drawdown is 8%, meaning your drawdown level is $92,000.
If your account equity reaches or falls below $92,000, you breach the drawdown rule.
Example 2 – Account Growth and Trailing Drawdown
You start with $100,000 and make a 5% profit, bringing your balance to $105,000.
Your maximum drawdown moves up to $96,600 (trailing from the new high).
Example 3 – Trading Losses and Trailing Drawdown Behavior
Your balance reaches $112,000, so your drawdown trails up to $103,040.
You then lose 2%, bringing your balance down to $109,760.
However, your drawdown remains at $103,040 because trading losses do not lower the drawdown level.
Example 4 – Payout at Highest Equity and Account Reset
You reach $125,000 (your highest equity) and request a payout.
After your payout is processed, your account is reset to the initial balance of $100,000.
Your highest equity is reduced by the amount of your payout request, which is $25,000. Your highest equity is now reset to $100,000.
Your maximum drawdown is now calculated as $92,000.
Example 5 – Payout below Highest Equity and Account Reset
You reach $125,000 (your highest equity), and then lose $5,000. You then request a payout.
After your payout is processed, your account is reset to the initial balance of $100,000.
Your highest equity is reduced by the amount of your payout request, which is $20,000. Your highest equity is now reset to $105,000 ($125,000 - $20,000).
Your maximum drawdown is now calculated as $96,600.
Final Notes:
✔ The maximum drawdown starts as a trailing drawdown based on your initial account balance.
✔ It trails based on the highest equity on your account.
✔ If your equity falls below the maximum drawdown level, your account is breached.
✔ After a payout is requested, the highest equity used to calculate the trailing drawdown is reduced by the amount of the payout request.
✔ Both the maximum drawdown and maximum daily loss rules apply simultaneously.
Understanding these rules is crucial before attempting a 2-Step Crypto Edge Evaluation to avoid unnecessary breaches.