In the 2-Step Crypto Edge Evaluation, the maximum drawdown is 10% of your starting balance and follows a trailing mechanism, but it only trails up to the initial balance. Once the drawdown reaches the initial balance, it stops trailing and remains fixed.
Key Points to Understand:
✔ The maximum drawdown follows a trailing mechanism, adjusting upward as your account grows.
✔ However, once the drawdown reaches your initial balance, it stops trailing.
✔ It does not decrease after losses.
✔ Payouts reset your account to the starting balance, and the drawdown starts from there again.
Formula for Maximum Drawdown:
Maximum Drawdown Threshold = Highest Account Equity (High Water Mark) x 0.90
✔ The drawdown adjusts upwards as new highs are reached.
✔ Once it reaches the account initial balance, it stops trailing and stays fixed.
✔ If your equity falls below the maximum drawdown level at any time, your account is breached.
EXAMPLES
Example 1 – Starting a New Account
You start with a $100,000 account.
Your maximum drawdown is 10%, meaning your drawdown level is $90,000.
If your account equity reaches or falls below $90,000, 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 $94,500 (trailing from the new high).
Example 3 – Trading Losses and Trailing Drawdown Behavior
Your balance reaches $112,000, so your drawdown trails up to $100,000.
You then lose 2%, bringing your balance down to $109,760.
However, your drawdown remains at $100,000 because trading losses do not lower the drawdown level.
Example 4 – Drawdown Stops Trailing at Initial Balance
Your balance reaches $120,000 after a 20% profit.
Normally, the drawdown would trail to $108,000, but since this exceeds the initial balance, the drawdown stops trailing at $100,000.
From this point, the maximum drawdown remains fixed at $100,000 and does not move further.
Example 5 – Payout and Account Reset
You reach $125,000 and request a payout.
After your payout is processed, your account is reset to the initial balance of $100,000.
Your maximum drawdown starts again at $90,000, and trading resumes from the initial balance.
Final Notes:
✔ The maximum drawdown starts as a trailing drawdown but stops at the initial balance.
✔ It never trails beyond the initial account size.
✔ If your equity falls below the maximum drawdown level, your account is breached.
✔ Payouts do not lower the drawdown, but after a payout, the account resets to its initial balance.
✔ 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.