![]() You haven’t violated a rule, you stop trading and live to trade Day 4. Well, Day 3 doesn’t go so great, and you lose $2,100. As of right now your main concern is still the $2,200 daily loss limit. Your trailing draw down stopped at $100,000. Luckily Day 2 goes well, you make $2,500 and your balance is $104,000.ĭay 3 – We said we ended Day 2 with a big winner and a balance of $104,000. Right now, that is your number and you can’t lose more than that. BUT remember, your max daily loss is $2,200. The most you could lose and hit your trailing drawdown is currently $2,500. Your starting balance for the day is $101,500. ![]() We said you finish Day 1 with a $101,500 balance.ĭay 2 – Your trailing draw down is at $99,000 in the case of a company who calculates it after every trade. So Day 1, trade 1, you can’t lose more than $2,200. Remember, whichever of the 2 is smaller is your main concern at any point. This might all seem kind of confusing, but once you get into the evaluations you’ll see quickly how they work.ĭay 1 – Using the same example above of a $100,000 account, $2,200 daily loss limit and $3,500 trailing draw down. Therefore your trailing draw down hasn’t moved after trade number 2, and still sits at $99,000, or you now have $2,500 in space.Īn Example Of Daily Loss Limit and Trailing Draw Down Combined Your trailing draw down never goes down though remember, only up. Your balance is now $101,500, same as before. This is the lowest number you could pass before breaking a rule. Your trailing drawdown of $3,500 which means you couldn’t fall below $96,500 originally, has been pulled up by $2,500, so it now sits at $99,000. We do the same exercise, just after each trade. You still have $3,500 in space.įor a company who updates after each trade, the numbers will be less favourable. Your balance is $101,500 and your trailing drawdown which originally was at $96,500 is now at $98,000. Your account balance is $101, 500 at the end of the day and your trailing draw down has been pulled up by $1,500. Your ending balance is $101,500 ($100,000 + $2,500 – $1,000).įor a company who updates only at end of day, they don’t care about the individual trades. Assume a $100,000 account with a $3,500 trailing drawdown. Knowing this is very important.Īn example comparing 2 different methods. Some companies only look at this at the end of the day. This is where things can start to get a little confusing though. Always remember above all it only moves up, never down.
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