Simulated Drawdown Information
Simulated Loss - Drawdown
At Funded Trading Plus, we believe that effective risk management is essential to successful trading. Understanding how drawdown works is a key part of managing risk. We offer two types of drawdown structures across our programs: Static Drawdown and Relative Drawdown. Each type serves a different purpose and is tailored to suit various trading styles and trading personalities.
Our research relies upon trading strategies that operate within certain parameters of risk. We set each drawdown threshold to experiment with different variables within a simulated-live environment. This is to determine approaches towards risk management that have the capacity to generate profit.
What is Drawdown?
Drawdown is the maximum decline in a simulated account’s balance from a peak or otherwise defined level. It is often used to measure risk tolerance and the effectiveness of trading strategies. It is important to manage drawdown well to protect capital and create a sustainable trading approach. Just as it is the case in real markets, it is equally as important for your accounts that use simulated funds.
We’ll explain both Static Drawdown and Relative Drawdown in detail below to help you understand how they apply to each of our programs.
Static Drawdown
Static Drawdown, also known as absolute drawdown, offers a fixed drawdown level based on your initial starting balance. This type of drawdown remains constant, regardless of account peaks or trading gains. Static Drawdown is well-suited to traders who prefer straightforward risk limits that do not change with account performance, providing predictability and a clear-cut risk threshold.
How It Works
With Static Drawdown, your maximum loss level is set at the beginning and remains unchanged. For example, if you start with a $100,000 simulated account and a Static Drawdown of $10,000, your Maximum Drawdown level will always be $90,000.
Unlike Relative Drawdown, Static Drawdown does not adjust with account highs or new closed balance peaks, so you have a stable reference point for risk regardless of gains. This approach helps traders focus on longer-term growth without frequent adjustments to the drawdown limit.
Example
For a $100,000 simulated account with a Static Drawdown of 10%:
Starting Balance: $100,000
Maximum Drawdown: $90,000 (set at 10% of the starting balance and does not move)
The Maximum Drawdown remains $90,000 even if the simulated account balance grows beyond $100,000, making Static Drawdown a simple and predictable way to manage risk.
Static Drawdown by Program:
- Prestige Trader Program: 10%. W
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%
- Premium Trader Programs Relative Drawdown is 8%
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%
- On the Premium Trader Program the Daily Drawdown is 4%
- On the Prestige Trader Program the Daily Drawdown is 5%
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.