The Max Drawdown is the maximum your account is allowed to drawdown at any time before breaching your account. You can think of it as the “total account stop-loss”.
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The initial Max Drawdown is set at 8% as standard from the starting balance of your account. (You can also purchase a completely optional 10% Max Drawdown at checkout.)
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An 8% or 10% Max Drawdown (combined with the 10% virtual profit target) on a 1 Step evaluation are both unbeatable in the trader evaluation services industry.
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Whilst the Max Drawdown on the evaluation is a relative drawdown, the drawdown only follows you up until you reach a virtual profit target of 8% after which we completely remove the relative drawdown and allow you to draw back down to your initial starting balance before breaching your account.
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This means after reaching a virtual profit target of 8% the Maximum Drawdown can grow to be much greater than 8%.
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For example, if you have a $100,000 account, you can go down to $92,000 before breaching the account. Let’s say you are a profitable trader and make $4,000 in your account. Your High-Water Mark is now $104,000. Your Max Drawdown limit will be $96,000. Next, you make an additional $4,000 in your account. So, your new High-Water Mark is $108,000. Here is where the Max Drawdown locks in, so as your High-Water Mark rises your Max Drawdown limit will stay at $100,000, which means your Max Drawdown increases beyond 8%. Let’s say you have grown your account to $120,000. Your effective Max Drawdown level is now 20% (2.5x greater).
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​Note: Once the first withdrawal is made in a GFN simulated Funded Account, the Max Drawdown expires and your Max Drawdown will lock in at your starting balance. This encourages traders to adopt a long-term mindset and compound their accounts to achieve larger-sized payouts.
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The Daily Loss Limit and Max Drawdown rules serve as important risk management measures, ensuring that traders control their equity fluctuations within a specified range. By adhering to these rules, traders can protect their simulated capital and maintain a disciplined approach to managing their account!