Help CenterAt CTI, we offer Balance-Based Drawdown, which calculates drawdowns based on the initial balance of your trading account, considering only closed trades.
Here's how it works:
The drawdown is calculated based on the initial account balance using the following formula:
Absolute Drawdown = (Initial Account Balance – Lowest Account Balance) / Initial Account Balance x 100%
Example:
If a trader starts with an account balance of $100,000 and the account balance drops to $90,000:
Drawdown = ($100,000 - $90,000) / $100,000 x 100% = 10%
If the balance further drops to $85,000:
Drawdown = ($100,000 - $85,000) / $100,000 x 100% = 15%
Since CTI allows a maximum absolute drawdown of 10%, dropping to $90,000 would reach the limit. Any further loss below this level would exceed the limit, disqualifying the trader from the challenge or resulting in the loss of their funded account.
The Benefits of Balance-Based Drawdown for Traders
Balance-Based Drawdown offers traders more flexibility by setting a daily loss limit based solely on the current account balance, without considering prior losses. This method provides a fresh start each day, allowing traders to recover from past performance and adjust strategies without being constrained by previous results.
It is particularly beneficial for those seeking a predictable and consistent risk management system, as it ensures the loss limit is unaffected by unrealized gains or losses. Traders at CTI enjoy this flexibility, making it easier to plan and execute strategies with a clean slate each day. For more on drawdown types and comparisons, check out our full article: What Is Drawdown in Prop Trading?.
Feel free to contact our support team for more insights into how our policies can support your trading success.