In the 1-Step Crypto Edge Evaluation, the maximum drawdown is 6% of your highest equity and follows a trailing mechanism throughout the evaluation. Payouts do not affect the trailing drawdown, as the account resets to its initial balance after a payout.
KEY POINTS TO UNDERSTAND
Definition of Maximum Drawdown:
✔ The maximum drawdown is a trailing loss limit that adjusts upward as your account equity increases.
✔ The drawdown amount is fixed at 6% of your initial balance, but it moves upward when your account reaches new highs.
✔ It does not decrease due to trading losses—payouts reset the account to the initial balance.
How the Trailing Drawdown Works:
✔ The maximum drawdown follows your highest equity indefinitely, unless a payout is requested.
✔ It does not move down after trading losses, but it does move up when your equity reaches new highs.
✔ Payouts do not affect the trailing drawdown, as the account resets to its original balance after the payout.
Formula for Maximum Drawdown:
Maximum Drawdown = Highest Account Equity - Trailing Drawdown Amount (6%)
The trailing drawdown amount starts at 6% of your initial balance.
The drawdown adjusts upward when your account reaches new highs.
It does not decrease after trading losses.
It resets after payouts.
EXAMPLES
Example 1 – Starting a New Account
You start with a $100,000 account.
Your initial maximum drawdown is 6%, meaning the starting drawdown level is $94,000.
If your account equity reaches or falls below $94,000, 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 new maximum drawdown is now $98,700 (6% below the new High Water Mark of $105,000).
Example 3 – Drawdown Does Not Decrease from Trading Losses
Your balance reaches $110,000, so your drawdown trails up to $103,400.
You then lose 2%, bringing your balance down to $107,800.
However, your maximum drawdown remains at $103,400, because trading losses do not lower the drawdown level.
Example 4 – Drawdown Follows Account Growth Continuously
You reach $115,000 after a 15% profit.
Your maximum drawdown is now at $108,100 (trailing from $115,000).
Example 5 – Payout and Account Reset
You reach $120,000 and request a payout.
After your payout is processed, your account resets to its initial balance of $100,000.
Your maximum drawdown now resets to $94,000, based on the new starting balance.
You continue trading from the initial balance, and the trailing drawdown mechanism starts again.
Final Notes:
✔ The maximum drawdown is 6% of your starting balance and trails indefinitely as your account equity increases.
✔ It does not stop trailing at the initial balance (it keeps trailing as long as your account grows).
✔ If your equity falls below the maximum drawdown level at any time, your account is breached.
✔ Payout requests will not breach trailing drawdown limits, as the account is reset to the initial balance after a payout.
✔ Both maximum drawdown and maximum daily loss rules apply simultaneously.
Understanding these rules is crucial before attempting a 1-Step Crypto Edge Evaluation to avoid unnecessary breaches.