General Rules

In the Two-Step Challenge, there are two types of drawdowns: daily drawdown and max drawdown.

The max drawdown is static and is calculated from the initial balance of your account. For example, if you have a $100,000 account and your max drawdown is 8%, you can never exceed the $92,000 balance. Breaching this threshold means you fail the challenge.This amount remains constant throughout the challenge. If you maintain a balance above $92,000, you will not breach the challenge due to max drawdown.

However, there is also a daily drawdown that is calculated from the initial balance of the day. For instance, if you set it at 4%, on the first day of trading, your daily drawdown will be $4,000, setting your balance at $96,000.

If you make a profit of $2,000 and your balance is $102,000 at the beginning of the next day, your max drawdown remains the same at $92,000. However, your daily drawdown is 4% of the initial balance of the new day, totaling $4,080, so it is set at $97,920.

Unlike in the One-Step Challenge, you can never breach your account by withdrawal. For instance, if you withdraw your full $2,000 profit in this case, your initial balance the next day will be $100,000, so your daily drawdown will be calculated from this, so it will be $96 000 and your max drawdown will remain at $92,000.

In our One-Step challenges, the Max Drawdown is "Trailing," which means it is calculated differently than the regular Max Drawdown in Two-Step challenges. The daily drawdown remains the same; it is still calculated from the day’s initial balance.

If your daily drawdown is 3%, it will always be calculated from the day’s initial balance. For example, if your initial balance on Tuesday was $102,000, your daily drawdown will be $98,940.The trailing drawdown is calculated from the highest balance of your account. The difference between normal max drawdown and trailing drawdown is that the trailing drawdown changes with the highest balance on your account.

For example, at the beginning, your highest balance on your account is $100,000. Your trailing max drawdown is calculated from this. So if your trailing max drawdown is 6%, that is 6% of $100,000, which is $6,000, and the trailing max drawdown will be set at $94,000.If your highest balance reaches $103,000, the trailing max drawdown is set at 6% of it. 6% of $103,000 is $6,180, so your trailing max drawdown will be $96,820.

However, the max trailing drawdown can never exceed your initial balance value. If you bought a $100,000 Challenge and your highest balance reaches $108,000, your max drawdown would be $101,520. But it doesn't!Once your trailing max drawdown exceeds the initial balance of your challenge, $100,000, it gets locked and never exceeds the initial balance of your account, $100,000.

So, even though your highest balance is $108,000, the max trailing drawdown will be $100,000. The same applies when your highest balance is $110,000. The max trailing drawdown will still be $100,000.Practically, from this point, there is only the daily drawdown that you should care about. This drawdown is still calculated from the day’s initial balance. So if your initial balance of the day is $108,000, your daily drawdown will be $4,320, setting it at $103,680.From that point, you have the max trailing drawdown set at $100,000, but your daily drawdown is still calculated from your initial balance of the day.

There is one more thing you should be aware of. If you request a payout, you always have to have a safety cushion. For example, if you have an $8,000 profit, so your balance is $108,000, you can never withdraw the full profit of $8,000.Therefore, there will be no available Overall Drawdown limit left, and this would result in a breach of the account.