Search the Knowledgebase
< All Topics

What Does “Drawdown” Mean?

A drawdown is the drop from your highest account balance to a lower point, showing your losses. Once you’ve hit your maximum drawdown limit, your trading account automatically gets liquidated. There is no Daily Loss Limit (DLL), only a Max Loss Limit (MLL).

Drawdown Limits in Fast Track Trading

Your drawdown limit is 5% of your current balance, including profits, until you achieve a 5% profit on your starting balance. Once you reach a 5% profit, your drawdown limit locks at your starting balance. This means the limit changes until you hit the 5% profit target, after which it remains constant.

Example:

  • Starting Balance: $25,000
  • Initial Drawdown Limit: $1,250 (5% of $25,000)
  • If your balance increases to $26,500, your new drawdown limit is $25,000 account balance, as there was a 5% increase and your minimum balance will now forever be at $25,000.

Minimum Account Balance Calculator

If you still don’t know how to calculate your minimum account balance, you can use our custom drawdown calculator to see what your current minimum account balance is based on what account you have, and your total profit.

What Happens If You Exceed Your Drawdown Limit?

If your account drops below the drawdown limit, it will be automatically liquidated to prevent further losses. If your account is eligible, consider purchasing an account reset, however you should be aware of the advantages, disadvantages, and requirements of doing so.

Starting Balance Example:

  • Account Balance: $25,000
  • Drawdown Limit: $1,250
  • If your account drops to $23,750, it gets liquidated.

Once You Achieve a 5% Profit on Your Starting Balance

If your account balance reaches $26,250 (which is a 5% profit on the $25,000 starting balance), your drawdown limit locks at $25,000. This means that regardless of how much profit you make beyond this point, your drawdown limit remains at $25,000.

Example:

  • Account Balance: $27,000
  • Drawdown Limit: $25,000 (locked at starting balance after achieving 5% profit)

Account Resets

If your account is liquidated, you can reset it instead of starting over. This option is available for specific account types and helps you get back on track.

For more details on resetting your account, check out our article on Account Resets.

Table of Contents