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 use trailing drawdown?

Yes, Apex 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 sizeTrailing Threshold
$100,000 staticStatic $625

The Trailing Threshold Max Drawdown during Apex Challenge

As mentioned earlier, the trailing threshold is one of Apex’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 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 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 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 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 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 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

This post is also available in %s.