Rising Trailing Max Drawdown Explained
Managing Risk. Our rules are few. Take time to understand this critical parameter.
The Rising Trailing Max Drawdown is quantified and termed the Limited Trailing Minimum Account Balance (LTMAB).
The max drawdown amount assigned to your particular Evaluation account (example- $2500 for 8 contract account), trails your OPEN equity, intra-trade. NOT closed profit.
It will NEVER stop trailing the highest UNREALIZED profit point of your account throughout the ENTIRE Evaluation.
If met, your position will auto liquidate and you will lose the Evaluation. You will see a message that says, "Order can be placed by Administrators only" when you attempt another trade.
If you meet the LTMAB, you will need to reset if you wish to continue trading the account. CLICK HERE to understand the reset process. (A reset does NOT affect your renewal or expiration date, nor does your 30 day renewal fee automatically reset a failed account)
Tracking: To remain vigilant and prevent your account from breaching this limit, track your LTMAB in the Rithmic Trader Pro Dashboard in the column titled "Auto Liquidate Threshold Value (ALTV).
HOW IT WORKS
The Limited Trailing Minimum Account Balance is calculated live, Intra-Trade. The LTMAB will increase a defined distance as your account balance increases and is calculated in real-time during your open positions. If the balance decreases, then your trailing minimum account balance does not change.
For instance, the trailing max drawdown for a 3 Contract account is $1500. That means your account cannot drop below a loss of $1500 including fees/commissions and is calculated from your account balance high.
This stop continues trailing. Once the trader exceeds the account profit target, the stop will continue to trial i.e. if a trader meets the profit target but then the trade/account dips back below, the stop will continue to trail.
Traders - with this type of stop, it will trail infinitely, so once you have exceeded the profit target, keep an eye on your trail if you have not met the minimum 10 days of trading because the stop will continue to trail.
The trailing max drawdown is to help you evaluate your trading plan in current market conditions and prepare you for trading a live account where self-discipline, risk management and trading-plan-reflection is key to success and reminds traders.
We chose an aggressive trail during the evaluation phase - instead of one that stops at break even - because we truly want traders who can manage risk and where managing risk is always at their forefront.
Once in a live account the trailing stop is relaxed and once the trailing stop moves just above break even (please see below for more info) it does not move again so the Trader has full opportunity to grow the account in a way he/she desires.
Tracking: Traders can, and should, track this intra-trade in the column titled 'Auto Liquidate Threshold Value' in the R|Trader Pro Dashboard. The Auto Liquidate Threshold Value will update, not the Minimum Account Balance. This style of trailing balance encourages traders to take profit and to NOT give back to the market - Continue to grow your account!
Rising Trailing Drawdown, Explained to you by a EARNMAX Trader
Each Evaluation Subscription plan has a specific max drawdown amount. For example, the 12 Contract account, which is also $100,000.. has a max drawdown of $3000.
This means that the max you can lose is $3000 from the highest profit point (OPEN EQUITY, not closed profit), that your account reaches at any moment.
For example, you begin the first day with $100,000.. and the max you can lose is $3000 or a low of $97,000. You place your first trade and the active trade is in profit $600.. your max drawdown always TRAILS the profit peak in real time.. so now the max drawdown is $97,600. ($100,600- $3000 = $97,600). However.. you have not closed the trade yet.. and by the time you close the trade you only made $100 profit. Your max drawdown remains at $97,600- even though you only have $100,100 in the account. (because at one time during an active trade you reached a peak of $100,600). The max drawdown always trails by $3000 from the highest point. This is why, during the evaluation phase, you need to try and take profit as best you can when presented the opportunity.
How does the max drawdown operate in a Performance Account?
As stated. During the Evaluation Account phase, the trailing drawdown NEVER stops trailing during the entire test. This is not true of the Performance Account.
The trailing drawdown works the same way as the Evaluation HOWEVER it stops trailing at Initial Balance plus $100. It will no longer trail or ever move from Initial Balance plus $100 again. Example. A 12 contract / $100,000 Investor Performance account has a trailing drawdown of $3000. When the open equity of the account ever reaches $103,100.. the trailing drawdown will stop at $100,100 and never rise again.
You can always monitor what your real time max drawdown level is in the RTrader Pro EARNMAX Trader Dashboard.