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A trailing drawdown serves as a vital risk management tool in funded trading programs, functioning as a dynamic stop loss for the entire trading account. It adjusts the minimum allowable account balance in response to trading performance, helping maintain account viability and prevent termination due to significant losses. At Trading Funder, we emphasize the importance of understanding this mechanism, especially as implemented by platforms like Apex Trader Funding, where it is critical across different account sizes and trading stages. For traders looking to effectively manage risk and sustain their trading activities, grasping how the trailing drawdown operates within Apex Trader Funding’s framework is essential.
Trailing drawdown explained
What is a trailing drawdown?
A trailing drawdown is a term that is peculiar to funded trading programs, and it has multiple definitions, which include the following:
- A trailing drawdown can be defined as a moving stop loss for the whole trading account.
- Determining the allowed minimum account balance could also be a moving value.
- Finally, a trailing drawdown could be defined as a variable value a funded program uses to determine the maximum losses acceptable for a trading account.
One definite conclusion that can be drawn from the three different definitions above is that the trailing drawdown is constantly moving as long as the trader is engaged in active trades, which consequently affects the allowed minimum balance. Therefore, if, at a particular point, a trader’s account balance is equal to or less than the allowed minimum balance provided by the trailing drawdown, then that account is terminated, and the trader will not be allowed to continue with the program.
Does Apex Trader Funding use trailing drawdown?
Yes, Apex Trader Funding uses trailing drawdown. It functions as a marker for the limit on the amount of acceptable losses that a trader can suffer during the evaluation challenge before the account is failed or on a paid account before it gets terminated. Traders at Apex trader funding need to know the trailing threshold and understand it to trade steadily and responsibly. This will allow them to complete the challenge and enhance their prospects of retaining a paid account when they eventually win one.
What is the value of the Trailing Threshold in every Apex account size?
| Account size | Trailing Threshold |
|---|---|
| $25,000 | $1,500 |
| $50,000 | $2,500 |
| $75,000 | $2,750 |
| $100,000 | $3,000 |
| $150,000 | $5,000 |
| $250,000 | $6,500 |
| $300,000 | $7,500 |
| $100,000 static | Static $625 |
The Trailing Threshold Max Drawdown during Apex Trader Funding Challenge
As mentioned earlier, the trailing threshold is one of Apex Trader Funding’s rules, and it is present in the challenge and paid account. The trailing threshold max drawdown can be seen in the trader’s Rtrader dashboard under Auto Liquidate Threshold, and it is a value that should be noted; the importance has been briefly discussed already.
How does the Trailing Drawdown work during the Apex challenge?
The threshold max drawdown varies with the account size chosen by the trader. It is literally trailing the highest account balance, which is why the allowed minimum account balance is always changing relative to the highest profit the trader makes.
Example of the Trailing Drawdown during the Apex Challenge
Let us assume a trader chooses to go with the $100K account size for the Apex Trader Funding challenge; the trailing threshold is $3,000. Therefore, the allowed minimum account balance becomes:
$100,000 – $3,000 = $97,000
However, because the threshold is trailing and changes relative to the highest account balance, it means the allowed minimum balance will also be changing.
As the trader starts trading in the $100K account, let us assume he/she makes $2,000 in profits in the first trade, which means the account balance is now $102,000. This also changes the allowed minimum account balance as the new value becomes:
$102,000 – $3,000 = $99,000
If, in the next trade, the trader suffers losses of $700, that will change the account balance to $101,300, but the allowed minimum account balance does not change because the trailing threshold does not move when the trader suffers losses. Only when profits are made, and the account balance keeps going higher than the trailing threshold will be active, thus increasing the allowed minimum balance as well.
So, if the trader should make another trade that brings a profit worth $2,700, the account balance again shoots up to $104,000, and as such, the minimum account balance becomes $101,000 instead of $99,000.
$104,000 – $3,000 = $101,000
When the Apex Trader Funding trailing threshold is calculated?
The trailing threshold is calculated Intra trade.
It is important to point out that the allowed minimum balance is not determined by the account’s value when a trade is closed but rather by the highest balance the trader attained on the account at any time while trading in the market.
Let’s start with the $100K account size, and let us assume that the trader made open a trade that gets the balance to $103,000, but the trader does not close the trade with that profits, but he closes that trade when the balance is $102,500.
The acceptable minimum balance, in this case, is not:
$102,500 – $3,000 = $99,500
But rather is:
$103,000 – $3,000 = $100,000
The Trailing Threshold Max Drawdown during Apex paid account
How does the Trailing Drawdown work during an Apex-paid account?
For the Apex paid account, the trailing threshold max drawdown principle is similar to how it works in the Apex Trader Funding challenge, except that at a certain point, the trail will stop once the trader’s allowed minimum balance exceeds the starting balance by $100. The example below will explain that better.
Example of the Trailing Drawdown during the Apex Trader Funding Paid Account
We are still taking an example of a $100K account size with a trailing threshold of $3,000. When the trader makes a profit of $2,000 and then closes the trade, the account balance shoots up to $102,000, which leaves the allowed minimum account balance at $99,000, as it has increased from the initial $97,000.
Similarly to the Apex Trader Funding challenge, the minimum account balance remains unchanged when the trader suffers losses.
However, as mentioned earlier, there is a slight difference at some point between the Apex paid account and the Apex challenge account. The trailing is not continuous in the paid account once a certain benchmark is attained, which involves exceeding the designated acceptable level of risk by $100.
On the $100K Apex Trader Funding paid account size with a designated trail of $3,000, the trader must exceed $103,100 for the trail to stop. So, the minimum balance for the threshold to stop trailing is $100,100.
The benchmark for trailing threshold to stop:
Account size + trailing threshold max drawdown + $100
In this case: $100,000 + $3,000 + $100 = $103,100
Allowed minimum balance for trailing threshold to stop:
Account size + $100
$100,000 + $100 = $100,100
Conclusion on Apex Trailing Threshold Max Drawdown
Understanding the trailing drawdown is crucial for traders at Apex Trader Funding, where it functions as a dynamic stop loss that adjusts based on trading performance. The drawdown limits the acceptable losses during both the evaluation and paid account stages, ensuring traders maintain a risk-conscious approach. Apex’s trailing drawdown moves only when profits are made, allowing traders to lock in gains while minimizing risk. As highlighted in Trading Funder’s analysis, this mechanism is essential for sustained success in the program, and mastering it is key for traders aiming to complete the challenge and secure long-term profitability.
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