The "Maximum Drawdown" feature is a key component of For Traders Phase 1 and Phase 2 of the Two-Step challenge. It works in tandem with another feature called "Maximum Daily Drawdown". In One-Step Challenges, the "Daily Drawdown" is trailing, which is explained below.

Two-Step Challenge Drawdowns

"Daily Drawdown" is a critical rule and it's set at either 4% of your initial account balance, or at the amount you customize during your challenge purchase. The sum of all your positions (both closed and open) for the day must not hit or exceed this "Daily Drawdown". If you end the day with losses totaling more than this limit, it's considered a rule violation.

Importantly, the "Daily Drawdown" moves in sync with the initial balance of each new trading day. Every midnight (Summer server time: GMT+3, Winter server time GMT+2), it resets to the initial percentage limit (e.g. 4%) of the account balance at that moment.

The "Max Drawdown" feature works a bit differently. Unlike "Daily Drawdown", which resets daily, "Max Drawdown" takes into account all your open and closed profits/losses over time. If your cumulative losses ever exceed 9% of your initial account balance (or the amount you chose when you purchased your challenge), it's considered a violation.

Both "Daily Drawdown" and "Max Drawdown" rules take into account any commissions and swaps associated with your trading.

In essence, these rules aim to manage risk and promote consistent, reliable trading while mitigating the chances of a significant account drawdown. They encourage discipline and help ensure that even after a bad day, you're still in a position to trade another day​.

As we know, that description without real examples could be confusing, let check 3 scenarios in more detail:

Scenario 1 - Profit without crossing Daily Drawdown

The user makes a profit of $2,000 on Day 1. The account balance becomes $102,000, and the Max Daily Drawdown for Day 2 is now 4% of $102,000, which is $4,080. The Max Drawdown remains at $10,000. The user has not violated any rules and continues trading.

Scenario 2 - Profit after crossing Daily Drawdown but not Max Drawdown

On Day 1, the user makes a loss of $6,000, crossing the Daily Drawdown limit. This constitutes a rule violation and typically, the account will be terminated, despite the fact that the Max Drawdown has not been breached.

Scenario 3 - Loss without crossing Daily Drawdown

The user makes a loss of $2,000 on Day 1. The account balance is now $98,000, and the Daily Drawdown for Day 2 is $3,920 (4% of $98,000). The Max Drawdown remains at $9,000. The user has not violated any rules and continues trading.

Finally, let us once again point out that:

• Calculation takes into account closed and open positions
• Daily Drawdown is reset every midnight (Summer server time: GMT+3, Winter server time GMT+2)

One-Step Challenges: Trailing Max Drawdown

In our One-Step challenges, the Max Drawdown is "Trailing", which means that it is calculated differently than the regular Max Drawdown on Two-Step challenges.

The Trailing Max Drawdown works like this:

• The breach percentage tracks the highest balance ever recorded on that particular challenge and is calculated from that value. For example, if you purchased a One-Step challenge with Max Drawdown of 6%, and started on a $100,000, and your highest balance on the challenge was $104,000, that moves the breach level of this rule to $97.760 (6% down from $104,000).
• The breach level never moves above your initial balance. So, in our $100,000 scenario, even if your highest balance was $107,000, the breach level would be $100,000 and never more than that.
• When you withdraw profits, your Trailing Max Drawdown on that account is unaffected by the withdrawal and the resulting balance change. That means that if by the withdrawal you exceed the current Trailing Drawdown limit, that will result in a breach.