Help CenterThe maximum overall loss also called the maximum overall drawdown, stops traders from losing over 10% of their initial account equity. It also adjusts to prevent potential losses during the course of your trading journey, ensuring that the maximum overall loss level stays in sync with the equity growth, dynamically adjusting in parallel with equity gains, thereby trailing the maximum loss level accordingly.
This rule applies to both the challenge and the funded account, and it is one of the most important in order to protect Sway’s capital. Breach this and the account is closed. It is therefore very essential to understand how the maximum overall loss works.
Calculation Methods:
Based on the Initial Equity of the Account
Once you receive your account, the maximum overall loss is calculated at 10% below the initial equity.Based on the Overall Equity Growth
During your trading journey, the system records the account's high-water mark (the highest equity point). If the equity increases, the maximum overall loss also adjusts upwards (trailing) by the same amount. Trailing occurs in real time, whenever the server registers a new high-water mark.
It is important to note that the account balance and maximum overall loss reset to their default levels after a payout.
For example:
A $100,000 account with a 10% maximum overall loss.
Day 1
Starting Account Equity: $100,000
Max. Overall Loss: $100,000 – $10,000 = $90,000
This is the maximum overall loss level at the beginning.
During the trading day, the trader made $2,000 and subsequently lost $500, finishing the day with a total account equity of $101,500. The highest account equity recorded (or the high-water mark) was set at $102,000.
Day 2
High-water mark (the highest the account equity has been): $102,000
Max. Overall Loss: ($100,000 – $10,000) + $2,000 = $92,000
It is critical to note that the maximum overall loss level trails the high-water mark and adjusts upwards (trailing) by the same amount. Trailing occurs in real time, whenever the server registers a new high-water mark.
Should you breach the loss limit in the trading account, then your account will be closed. You may retake the practical evaluation by purchasing another challenge, should you wish to show that you now fully understand the limits.
Please note that during the purchase of your challenge, you can choose to increase the drawdown limits of your account, doubling it in size by purchasing an add-on (but note that this also means that the profit target doubles in size).