How does the drawdown work?
How does the drawdown work?
Welcome to our information page on how does the drawdown work!
As you take on our Challenge, our system will analyze your trading strategy and evaluate your level of consistency. One of the key criteria we assess is your daily and overall drawdown.
How does the daily drawdown work?
Traders can have a maximum daily drawdown of 5% from their initial starting equity (including all floating losses & profits), within a 24-hour period starting at 5 pm EST.
For example: if your starting balance is $200,000, your daily drawdown limit would be $10,000 (5% of $200,000). This means that if your account balance drops below $190,000 at any point during the trading day, you would be in violation of the daily drawdown rule.
However, if your account balance increases, your daily drawdown limit will adjust accordingly. For instance, if you end the day with a profit of $10,000, your starting balance would increase to $210,000, and your new daily drawdown limit would be $10,000.
To calculate your daily drawdown limit, simply multiply your starting balance by 0.05. It’s important to note that this rule applies to all three phases (Evaluation, Verification, and Funded) of every challenge. Any violation of this rule will result in an automatic failure of your challenge account.
How does the overall drawdown work?
For the duration of your challenge, the capital in your trader account cannot at any given time drop below 8%.
For example: if you have a starting balance of $100,000, the drawdown limit would be $8,000. This means that if your account balance falls below $92,000, you would violate the “overall drawdown” rule.
To calculate the drawdown limit, simply multiply your starting balance by 0.08. If you violate this rule, it will result in an automatic failure on your challenge account. It’s important to note that the same overall drawdown limit applies to all three phases (Evaluation, Verification, and Funded) of every challenge.
* Additionally, we advise against trading one hour before and after the market rollover due to the potential for unfavorable market conditions caused by low liquidity and high volatility. We want to ensure that you have the best chance of success during your challenge, and adhering to our risk management policies is crucial to achieving your goals.
Thank you for taking the time to learn about how drawdown works at Clarity Traders. We believe that maintaining a certain level of capital is essential for long-term trading success, and our drawdown rules are designed to help you manage risk and protect your account. By adhering to these rules, you will have a better chance of achieving your trading goals and becoming a successful trader. Good luck on your challenge!
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