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Relative and Daily Drawdown Information

Relative Drawdown

Video Overview

Relative Drawdown Is Very Simple to Understand

Definitions:

  • Maximum Drawdown – An account balance level you cannot trade downwards through
  • High Water-Mark – The account starting balance or if higher, the closed account balance trading high
  • Relative Drawdown – The distance between the High Water-Mark and the Maximum Drawdown
 

Each time you close a profitable trade and take your balance up above the starting balance, your Maximum Drawdown level moves up. The Relative Drawdown is the distance between the closed balance high (your high water-mark HWM) and the Maximum Drawdown.

The Relative Drawdown remains the same value until the trader makes a closed balance profit equal or higher than the Relative Drawdown amount. At this point the Max Drawdown point locks in and the trader can increase the Relative Drawdown by trading further up.

  • Experienced Trader Programs Relative Drawdown is 6%
  • Advanced Trader Programs Relative Drawdown is 10%
  • Master Trader Programs Relative Drawdown is 6%
 

Relative Drawdown moves up with a positive trade balance. It does not move down with a negative trade balance.

Drawdown Calculator

You can see how this all works out with our simple calculator by clicking here

Experienced Trader Example

Example: On a $100,000 Program an individual makes a profit of $1,000. They now have a closed balance of $101,000. The maximum Drawdown moves from $94,000 to $95,000. The original Relative Drawdown percentage of 6% does not change.

When the trader makes a closed  profit of $6,000 (6%) or more the Max Drawdown locks in at the starting balance. Balance now $106,000, Max Drawdown at $100,000. Relative Drawdown remains the same at 6%.

Now when the trader moves up with a positive closed balance that is higher than 6%, the Relative Drawdown increases proportionally. 

  • Trader makes a closed balance of $108,000, Relative Drawdown is now 8%. 
  • Trader makes a closed balance of $121,000, Relative Drawdown is now 21%.

Advanced Trader Example

Example: On a $100,000 Program an individual makes a profit of $1,000. They now have a closed balance of $101,000. The maximum Drawdown moves from $90,000 to $91,000. The original Relative Drawdown percentage of 10% does not change.

When the trader makes a closed profit of $10,000 (10%) or more the Max Drawdown locks in at the starting balance. Balance now $110,000, Max Drawdown at $100,000. Relative Drawdown remains the same at 10%.

Now when the trader moves up with a positive closed balance that higher than 10%, the Relative Drawdown increases proportionally. 

  • Trader makes a closed balance of $112,000, Relative Drawdown is now 12%. 
  • Trader makes a closed balance of $121,000, Relative Drawdown is now 21%.

Master Trader Example

Example: On a $100,000 Program an individual makes a profit of $1,000. They now have a closed balance of $101,000. The maximum Drawdown moves from $94,000 to $95,000. The original Relative Drawdown percentage of 6% does not change.

When the trader makes a closed profit of $6,000 (6%) or more the Max Drawdown locks in at the starting balance. Balance now $106,000, Max Drawdown at $100,000. Relative Drawdown remains the same at 6%.

Now when the trader moves up with a positive closed balance that higher than 6%, the Relative Drawdown increases proportionally. 

  • Trader makes a closed balance of $108,000, Relative Drawdown is now 8%. 
  • Trader makes a closed balance of $121,000, Relative Drawdown is now 21%.

How Does a Withdrawal Affect Relative Drawdown?

All withdrawals reduce the trader’s Relative Drawdown by the same amount. 

It is recommended that traders only withdraw an amount that is smaller than their Relative Drawdown and allows them space to continue trading the account up. Our successful long term traders understand their personal trading statistics and build themselves a Relative Drawdown buffer to suit their personal trading style.

A trader who withdraws a sum equal to their Relative Drawdown will not be able to continue trading the account.

Daily Drawdown

Daily Drawdown is a trading balance level the trader cannot trade down through each day. At 23:59 server time each day, the balance (closed trades) of a trading account is measured, and the calculation is sent to the trader’s dashboard.

  • On the Experienced Trader Program the Daily Drawdown is 4%
  • On the Advanced Trader Program the Daily Drawdown is 5%
  • On the Master Trader Program the Daily Drawdown is 6%

The Daily Drawdown is a new level each day and does not move from this point during the day no matter how the trader trades.

Daily Drawdown is not the same as Max Drawdown. It is possible for Daily Drawdown to be a lower level than Max Drawdown.

Simulated Live Accounts

Relative Drawdown works exactly the same on all live account programs as their corresponding evaluation accounts.

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