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Understanding Max Daily and Total Drawdown in the Standard Challenge
Understanding Max Daily and Total Drawdown in the Standard Challenge

Comprehensive Look at Max Daily Drawdowns and Max Total Drawdowns in the Standard Challenge

Updated over a week ago

Maximum Daily Drawdown

Max Daily Drawdown: 5% (6% with Drawdown Add-On)

  • In the course of one working day, the maximum daily drawdown on the demo account (which consists of the account’s current result of opened positions and the result of positions closed on the given day) is calculated based on the simulated balance or equity, whichever is greater when the day changes at 5 pm est.

  • The max daily drawdown amount is always fixed to 5% of the initial balance unless you purchased the simulated Drawdown add-on, which grants you a 6% simulated max daily drawdown.

  • Please note the max daily drawdown includes commissions and simulated swap fees. If the account at any point breaches the max daily drawdown then the demo account is violated.

Note: We also utilize a reconciliation module that reviews breaches the following day to add an additional layer of verification for any breach activity.

Reset Time

The max daily drawdown resets every day between 4:57 PM - 5:03 PM EST. To ensure smooth functionality, we advise our simulated traders to not execute trades in between the window of 4:57 PM - 5:03 PM EST when the drawdown is being reset. Once your last virtual balance/equity (whichever is higher) is pulled for the trading day your dashboard will update with your new Daily Breach Level. This is the amount your account simulated equity must stay above in order to not be breached.


Daily Drawdown Rules Examples

Example 1: No Drawdown Add-On Account

On a 100K simulated funds Standard Simulated Challenge, if between 4:57 PM - 5:03 PM EST you have an open trade with a simulated floating profit of $2,000, your demo account simulated equity will be 102K. With a simulated 5% daily drawdown, the simulated equity cannot drop below $97,000 ($102,000 - $5,000 = $97,000) on the next trading day. Simulated drawdown is calculated based upon the initial demo account balance.

Example 2: With Drawdown Add-On Account

On a 100K virtual Standard Simulated Challenge, if between 4:57 PM - 5:03 PM EST you have an open trade with a simulated floating profit of $2,000, your demo account equity will be 102K. With a simulated 6% daily drawdown, the equity cannot drop below $96,000 ($102,000 - $6,000 = $96,000) on the next trading day. Drawdown is calculated based upon the initial demo account balance.

Example 3: No Drawdown Add-On

Alternatively, if on a 100K virtual funds Standard Challenge between 4:57 PM - 5:03 PM EST you have an open trade with a simulated floating loss of -$2,000, your demo account equity will be $98,000. Because your $100K simulated funds balance is higher than your $98,000 equity, your daily virtual drawdown limit of $5,000 will be calculated on a $100K demo balance. This means for the next trading day, the equity cannot drop below $95,000 ($100,000 - $5000 = $95,000).

Example 4: With Drawdown Add-On

Alternatively, if on a 100K simulated funds Standard Challenge between 4:57 PM - 5:03 PM EST you have an open trade with a simulated floating loss of -$2,000, your account equity will be $98,000. Because your demo $100K simulated funds demo balance is higher than your $98,000 demo equity, your simulated daily drawdown limit of $6,000 will be calculated on demo $100K simulated funds demo balance. This means for the next trading day, the equity cannot drop below $94,000 ($100,000 - $6000 = $94,000).

Example 5: No Drawdown Add-On

If there are no open trades at 5.00pm EST, the daily drawdown will be 5% of whatever the demo closed balance is.

Example 6: With Drawdown Add-On

If there are no open trades at 5.00pm EST, the daily drawdown will be 6% of whatever the closed demo balance is.


Maximum Drawdown

Maximum Total Drawdown: 10% (12% with Drawdown Add-On)

The maximum total drawdown is 10%. Therefore, the equity of the demo account must not fall below 90% of the initial demo account balance both for open and closed positions, including simulated commissions and simulated swaps.

If you purchase a Standard Challenge with the Drawdown add-on, your maximum total drawdown will be 12%. Therefore, the virtual equity of the account must not fall below 88% of the initial demo account balance both for open and closed positions, including simulated commissions and simulated swaps.

Note: We also utilize a reconciliation module that reviews breaches the following day to add an additional layer of verification for any breach activity.


Violations

Any violation of the rules above will result in the termination of your trading account and you will not be eligible to move forward in the program with that account.

Please note both the daily drawdown and max drawdown breach on an account include simulated commissions, simulated swap fees and simulated dividends (only on ThinkMarkets) as well.

All active ThinkMarkets & Eightcap accounts will be transitioned to DXTrade by February 27th, 5PM EST. These customers should close their trades by 4 PM EST on February 26th, 2024. Failure to do so will result in trades being automatically closed or liquidated to facilitate a seamless transition to DXTrade.

Our outsourced system, on a regular cadence, gathers the required tick data from our Trading Platform provider to calculate drawdown violations. Real-time equity tracking is not technologically feasible and thus what is displayed on the dashboard is provided 'as-is' and solely for informational purposes. Therefore, we deploy a proprietary reconciliation system intended to identify discrepancies in account drawdown calculations. This reconciliation system runs each day, using the prior periods data, to identify drawdown violations. Based on reconciliation system results, TFT may in its sole discretion undertake and execute the rejection of payouts if the drawdown violation occurred prior to a payout request, termination of funded or challenge accounts identified to have violated their drawdown in a prior period, and termination of funded or challenge accounts that were upgraded, merged, or scaled from a funded or challenge account that violated their drawdown parameters. TFT exercises its right to take and implement without prior notice one or more of the firm actions referenced above, in accordance with our customer agreement and Terms of Use.


It is important to note that if you purchased a Standard Challenge account prior to July 8th, 2023, then your Daily Drawdown will remain at 6% and your simulated Max Drawdown will remain at 12%.


NOTE: All Phase 1 & 2, as well as TFT Funded Accounts, are routed through a simulated feed, therefore simulating real market conditions.

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