How is the Daily Drawdown (DD) calculated in 1-Step and 2-Step Challenges?
The Daily Drawdown is a constant 4% in 1-Step and 5% in 2-Step - of the starting balance, which subtracts from the Balance/Equity, whichever is higher at the start of the day.
Daily reset will occur at 5pm EST.
Daily drawdown limits are a crucial mechanism designed to ensure traders engage in controlled and disciplined trading practices. These limits also aim to safeguard trading accounts within the set risk thresholds, maintaining long-term sustainability for participants.
Example 1:
You have a 100k account.
Your Daily Drawdown is static 4%. That means that the maximum your equity can go down to is $96,000.The Equity could go to $103,000 and come back down to $96,000 the same day and still be able to trade.For instance, if your equity starts at $100,000, the 4% daily drawdown would mean your equity cannot go below $96,000. Alternatively, if your equity increased to $102,000 during trading, the 4% drawdown would reset at $102,000, making the new limit $97,920.
Example 2:
You have a 100k account and you swing into the next day with an equity of $102,000.
Your Daily Drawdown would be calculated based on the highest statistic, which in this case would be $102,000 (Previous Day Equity).
The next day's Daily Drawdown limit is recalculated based on the highest value of equity or balance at the start of the day. For example, if equity was $102,000, the limit would adjust to $97,920 (4%) for 1-Step or $96,900 (5%) for 2-Step challenges.
Breaches often occur when traders fail to monitor their updated equity levels or misunderstand the reset mechanism. For instance, if your calculated drawdown limit is $98,000 but ongoing losses bring your equity below this value, it will result in a breach. Similarly, profit-related resets may create scenarios where traders misinterpret limits, leading to inadvertent breaches.
Your Maximum overall Drawdown will remain static from the starting balance of $100,000. That means that the maximum it can go down to is $94,000 (6%) for 1-Step, and $90,000 (10%) in 2-Step.
How is the Max Drawdown (DD) calculated in 1-Step and 2-Step Challenges?
The Maximum Allowable Loss Limit is the maximum amount of equity you can lose before your account is considered failed. This limit is fixed and does not change with fluctuations in your account balance.
Example:
In a $100,000 1-step challenge, the maximum loss limit is set at $94,000. Even if your account balance increases, the maximum loss limit will remain at $94,000, regardless of any profits made.
Please note that you will breach your account if either the daily or max drawdown limit is hit. To reduce risks, traders are advised to regularly monitor their account dashboards and ensure their strategies align with daily and maximum drawdown thresholds. For more detailed guidance, consult the Blueberry Funded FAQ or help sections.