How is the Daily Drawdown (Trailing) calculated in the 3-Phase Challenge?
The Daily Drawdown is trailing and is based on the previous End-of-Day (EOD) Equity. This means that at the start of each trading day (5 PM EST reset), your daily loss threshold is recalculated as 3% of the prior day’s closing equity.
Example 1:
You start the day with $100,000 in equity.
Your Daily Drawdown Limit is set at $97,000 (3% below $100,000).
If your equity rises to $103,000, the new Daily Drawdown Limit for the next day will be $100,000.
If your equity drops below $100,000, you will breach the daily limit.
Example 2:
You swing into the next day with an equity of $105,000.
Your new Daily Drawdown Limit is $102,000 (3% below $105,000).
If equity drops below $102,000 during the day, your account will be breached.
This process repeats daily, ensuring that your drawdown limit updates based on your previous day’s performance.
How is the Max Drawdown (Trailing) calculated in the 3-Phase Challenge?
The Max Drawdown is a trailing 5% of the highest equity achieved at any point during the challenge. This means your maximum allowable equity loss is dynamically adjusted as your account grows.
Example 1:
Starting with a $100,000 account, the Max Drawdown is $95,000.
If your equity rises to $105,000, your Max Drawdown moves up to $100,000 (5% below $105,000).
If your equity drops below $100,000, you will breach the Max Drawdown limit.
Example 2:
Your account grows to $110,000.
The Max Drawdown is now set at $105,000 (5% below $110,000).
If equity drops below $105,000, you breach the Max Drawdown limit.
Unlike the Daily Drawdown, which resets daily, the Max Drawdown continues to trail your highest reached equity without resetting.
Summary of Drawdown Rules for the 3-Phase Challenge
Drawdown Type | Calculation Method | Limit |
Daily Drawdown (Trailing) | 3% of previous EOD equity | 3% |
Max Drawdown (Trailing) | 5% of highest reached equity | 5% |
⚠ You will breach your account if either the Daily or Max Drawdown limit is hit.
Additional Infomation:
Unlike the Rapid Plan, the 3-Phase Challenge does not have a balance protector. This means that once your account reaches a new high, the trailing Max Drawdown will continue to adjust upwards, but it does not lock in at a fixed level like in the Rapid Plan.