What is the Trailing Drawdown?
The trailing drawdown is a risk management mechanism designed to ensure traders maintain proper risk discipline. For the 1 Phase Challenge, the trailing drawdown locks at the initial account balance once your account has reached that level or higher.
How Does the Trailing Drawdown Affect Payouts?
When a payout request is made, the trailing drawdown does not reset. This means the trailing drawdown remains locked at its established level, regardless of how much profit is withdrawn. Traders must leave sufficient funds in the account to avoid breaching the trailing drawdown level.
The Importance of Leaving a Buffer
If a trader requests the full profit without leaving a buffer, the account balance after the payout will match the trailing drawdown level. This results in the account being breached and subsequently closed. Here’s what happens in this case:
The account is breached: This means the account is no longer active, and the trader must purchase a new challenge to start again.
Full withdrawal option: While you are entitled to withdraw all profits, doing so forfeits the funded account for 1 Phase accounts.
Example Scenarios
Scenario 1: Leaving a Buffer
Account Size: $10,000 (initial balance).
Trailing Drawdown: Locked at $10,000.
Profit Earned: $2,000.
Payout Request: $1,500 (buffer left = $500).
Result: Account remains active because the post-payout balance is $500 above the trailing drawdown.
Scenario 2: Withdrawing All Profits
Account Size: $10,000 (initial balance).
Trailing Drawdown: Locked at $10,000.
Profit Earned: $2,000.
Payout Request: $2,000 (no buffer left).
Result: Account breached because the post-payout balance equals the trailing drawdown level ($10,000).
What Happens if the Account is Breached?
The trader will lose the funded account and need to purchase a new challenge to continue trading.
To avoid this, always ensure you leave a buffer when making a payout request.
Summary
Aspect | Details |
Trailing Drawdown | Locked at the initial balance. |
Payouts | Ensure a buffer remains after withdrawal to avoid breaching the account. |
Full Withdrawal Option | Allowed but forfeits the funded account for 1 Phase accounts. |
Account Breach Consequence | Funded account is closed, and a new challenge must be purchased to continue trading. |