What is Relative Drawdown? • Funded Crypto Trader

What is Relative Drawdown?

Posted on

Relative drawdown is part of every funded trading program. It is the maximum amount of money a trader can lose from their funded trading account.

Key points:

  • Relative Drawdown has a fixed value
  • It is NOT static
  • It is relative to high closed balance
  • Relative Drawdown moves up
  • Relative Drawdown locks in once it reaches the starting account value
  • Withdrawals do not change the level
  • It resets every day at 23:59 Server Time

Relative drawdown has a fixed value

It has a fixed value but is not static. The fixed value is set by the program size. For example:

For the standard $100,000 Program, the 10% Relative Drawdown has a fixed value of $10,000.

For the standard $50,000 Program, the 10% Relative Drawdown has a fixed value of $5,000. 

For the express $100,000 Program, the 6% Relative Drawdown has a fixed value of $6,000. 

For the express $50,000 Program, the 6% Relative Drawdown has a fixed value of $3,000.

Relative to High Closed Balance

Drawdown is relative to the high point of the closed balance of the account. When you close trades that have increased your profit on the account, the drawdown level will move up the same relative amount. It does not ever move down from this point.

Further closed balance profit increases will move the level further up. 

The position of the relative drawdown moves in relationship with the highest closed balance of the account. For example:

At the start of a Standard $100,000 program, the 10% drawdown is $90,000 ($100,000 – $10,000). If the trader then makes a closed profit of $5,000 the relative maximum drawdown moves to $95,000 (($100,000 + $5,000) – $10,000)).

The relative drawdown has moved up from $90,000 to $95,000.

Open trades that increase the equity of the account do not move the relative drawdown further up.

Relative Drawdown Locks at Starting Balance

When the relative drawdown level reaches the account starting balance, it locks in and will not rise any further. Further closed balance increases do not now move the relative drawdown. It has become static. On the express program, this will be when the trader has made a closed profit of 6% and on the standard program when the trader has made a closed profit of 10%.

From this point onwards further gains by the trader make the effective drawdown level bigger. Successful traders use this point as the launching pad towards building a larger account from which they can manage both further growth and withdrawals to their own bank account.

Daily Drawdown

Daily drawdown applies to every account. It’s the daily amount of drawdown your account has before you breach, your daily drawdown resets every day at 23:59 server time. At the end of each day, your account balance (closed trades) is recorded and your daily drawdown is calculated and reflected clearly on your dashboard.

  • Our Express challenge has a 3% Daily Drawdown
  • Our Standard challenge has a 5% Daily Drawdown

Your daily drawdown amount is fixed each day and does not change until the server resets at 23:59 server time.

Withdrawals from Live accounts

Withdrawals do not move the relative drawdown. Successful traders manage their account for further growth by only withdrawing a proportion of the account at any one time. The amount they withdraw is a personal choice based on their trading risk profile and how much relative drawdown they need. Generally, the greater the relative drawdown left in the account, the more successful a trader is likely to be in the future.

Withdrawing all profits is allowed but is a signal that the trader does not wish to continue with the program. Withdrawing all profits removes the relative drawdown and does not leave any space for further trading.

Feel like you’re ready to tackle a funded crypto trading challenge? Take ours now!