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Drawdown is a critical measure of risk in trading, representing the decline in equity or balance from its peak. It emphasizes the importance of maintaining strict risk management protocols. For our funding programs, the drawdown is measured as balance-based and varies by the specific challenge.
For the Instant Funding and Instant Funding Pro programs, the parameters for Max Absolute Drawdown are as follows:
Instant Funding & Instant Funding Pro
- Max Daily Loss: None
- Max Absolute Drawdown: 6% of the initial account balance.
Here's how it works:
The MAD is 6% of the Initial Account Balance. So, your losses should never surpass a 6% max loss of your initial account balance.
MAD = 6% x Initial Account Balance
The Stopout Level (SOL) is then calculated by deducting the MAD from the Initial Account Balance:
SOL = Initial Account Balance – (6% x Initial Account Balance)
For example, if your initial account balance is $80,000.
The MAD would be $80,000 x 6% = $4,800.
The SOL would then be $80,000 – $4,800 = $75,200.
How Does Drawdown Apply?
Both Instant Funding and Instant Funding Pro programs feature static drawdowns, where the threshold for max absolute drawdown remains constant and does not adjust based on new highs in the account balance.
- Static Drawdown ensures that traders have clear and fixed limits, fostering disciplined risk management.
- Max Absolute Drawdown applies to the total loss relative to the initial account balance, not a daily loss limit.
Summary
The Instant Funding and Instant Funding Pro programs offer straightforward risk parameters with the Max Absolute Drawdown capped at 6% of the initial balance. These programs provide clarity and simplicity in managing your account’s risk.
Want to learn about drawdown in prop trading? Check out this insightful blog post: What is Drawdown in Prop Trading?