This article covers everything you need to know about the trailing drawdown at Bulenox prop firm. Trading Funder emphasizes the importance of understanding the trailing drawdown rule, as traders frequently violate it by not paying sufficient attention. For those seeking a funded account from a prop firm, grasping how the trailing drawdown operates at Bulenox is crucial to achieving success.
What does a Trailing Drawdown mean?
A trailing drawdown, in principle, refers to an automatically changing stop loss for a trading account that never reduces. If the trader should hit that stop loss, the account gets terminated. In other words, it is defined as the minimum account balance that moves with the profits made in a trading account. The drawdown literally trails the profit because the more the profits made, the higher the trailing drawdown. However, it does not move when the trader incurs losses. Hence, the name, trailing drawdown.
How does the Trailing Drawdown Affect Your Trading Strategy?
The trailing drawdown is a crucial parameter used by prop firms to determine the eligibility of traders for funding. It is implemented to ensure traders can hold on to their earned profits and are not too eager to put back too much into the markets.
As a trader, the trailing drawdown will maybe limit your strategy. It can be disturbing or maybe sometimes painful in your trading journey. Still, it is important to understand that the trailing drawdown may enhance your trading strategy in the funded account. The trailing drawdown enables you to adopt a proper risk management strategy. It also ensures that you approach the market with discipline and consistency, especially when placing trades. As a result, you are forced to take a logical approach when placing trades rather than being arbitrary or haphazard about it.
How does the Trailing Drawdown Work at Bulenox?
The trailing drawdown is a key parameter at Bulenox, and two options are involved in understanding how it works with this prop firm. The two options are examined below with examples.
Option 1: Trailing Drawdown
There are some important things to note about this first option:
- The trailing drawdown is constantly moving relative to the current balance as determined by even realized or unrealized profits.
- The drawdown is measured in real-time throughout the trading day while also including a commission.
- A reduction in the account balance after a decrease does not change the allowed drawdown.
- Violating the allowed drawdown leads to the termination of the account.
Bulenox Trailing Drawdown Example
For example, a trader selects the $50,000 account with 7 max contracts and a maximum trailing drawdown of $2,500. This indicates that the maximum amount the trader can lose on this account is $2,500 from the highest profit point at any particular moment, including open positions. This means if the account balance should fall to $47,500, then the account will be terminated.
If the trader begins to trade and then earns $500, the maximum drawdown increases to become $48,000 ($50,500 – $2,500 = $48,000). If it the trader then incurs a loss of $200 before closing that particular trading position. The account balance changes to $50,300, but the maximum drawdown does not move as it remains unchanged at $48,000. Invariably, the maximum drawdown for this account size will always move $2,500 from the highest balance at any given point.
Option 2: EOD Drawdown
EOD drawdown = the end-of-day drawdown, which means it is updated each time a trading day ends. It applies to both the Qualification (evaluation) and Master (funded) accounts. With the EOD, it is the time the profit is earned that is considered once the trading day ends. Once the account balance reaches a new high at the close of the trading day, the EOD is updated. Note that the EOD trailing drawdown will always move in accordance with the account balance at the end of the trading day relative to the profit earned.
Bulenox EOD Drawdown Example
If the trader sticks with the $50,000 account with the same parameters of 7 max contracts and a maximum trailing drawdown of $2,500. As usual, once the account balance falls to $47,500, the account will get blocked.
On the first day of trading, the trader makes some winning and losing trades. If by the trading day’s close, the trader’s account balance closes at $51,000. The EOD balance is adjusted to $48,500.
On the second day of trading, the trader’s account then closes at $50,500. The EOD balance remains unchanged at $48,500.
On the third day, the trader’s account balance then rises and closes at $52,000. The EOD balance is then updated to $49,500. In essence, as long as the trader keeps making increased profits, the EOD balance will keep on getting adjusted, but when the trader suffers losses, the EOD balance will remain unchanged.
When does the Drawdown Stop Trailing in the Qualification Account?
The drawdown stops trailing once the trader has passed the Qualification Account and becomes eligible for a Master Account (funded account).
When does the Drawdown Stop Trailing in the Master Account?
The drawdown stops trailing in the Master Account when the trailing or EOD drawdown gets to the initial starting balance. For example, in a $50,000 account with a trailing drawdown of $2,500, the drawdown will stop trailing once the trader can make a profit of $52,500. This is because the trailing or EOD balance is now $50,000 ($52,500 – $2,500), which means it has reached the initial starting balance.
How does the Trailing Drawdown Work at Bulenox Special Account?
The Bulenox Special Account is also known as the micro account, with its parameters being the lowest among all the account sizes offered by Bulenox. This is because traders can only trade 5 micro contracts on this account.
The trailing drawdown works similarly in the special account, just like the Qualification account. It features two options as well, which include trailing drawdown and EOD drawdown. The drawdown for this special account is $1,000, which means the acceptable drawdown balance is $9,000 both for the trailing and EOD drawdown. Due to the small size of the account, traders might not monitor the drawdown closely, thus causing them to violate the trailing drawdown rule when using this special account.
Conclusion on Bulenox Trailing Drawdown
At Bulenox, the trailing drawdown is a dynamic stop-loss mechanism crucial for managing risk in both evaluation and funded accounts. It adjusts in real-time based on the highest achieved balance, allowing traders to lock in profits while setting a limit for potential losses. Trading Funder emphasizes that understanding and monitoring the trailing drawdown, whether in real-time or End-Of-Day (EOD), is vital for long-term success, as many traders fail due to overlooking this rule. Mastering the drawdown mechanism is essential for passing the qualification phase and maintaining a funded account at Bulenox.
