How to calculate maximum drawdown?
Maximum drawdown is total amount you can lose over the course of the entire competition.
The maximum drawdown is typically represented as a percentage based on your starting balance. This limit is more commonly reached in longer competitions, such as those lasting a week or a month.
For example, if the maximum drawdown is 12% and your starting balance is $100,000, this means that over the course of the entire competition, you can lose a total of $12,000 before being disqualified.
So, let’s say you experience a 5% loss one day (which is $5,000) and a 7% loss the next day (which is $7,000). Together, these losses would total 12% ($12,000), causing you to breach the drawdown limit and be disqualified from the competition.
It's important to carefully monitor your trades to stay within the maximum drawdown limits and avoid disqualification.
For example, if the maximum drawdown is 12% and your starting balance is $100,000, this means that over the course of the entire competition, you can lose a total of $12,000 before being disqualified.
So, let’s say you experience a 5% loss one day (which is $5,000) and a 7% loss the next day (which is $7,000). Together, these losses would total 12% ($12,000), causing you to breach the drawdown limit and be disqualified from the competition.
It's important to carefully monitor your trades to stay within the maximum drawdown limits and avoid disqualification.