The Maximum Trailing Drawdown (MTD) is a balance-based risk limit used only in the 1-Step Challenge. Prop firms also refer to it as Max Relative Drawdown.
🔷 How Does the Trailing Drawdown Work?
The MTD is set at 5% of the Initial Account Balance calculated from the highest account balance achieved.
Once your balance reaches a new high, your drawdown limit moves up with it.
It is based on your balance, not equity, so open trades don’t affect it unless closed.
🔷 How Is The Max Trailing Drawdown Calculated?
Max Trailing Drawdown (MTD) = Initial Account Balance x 5%
Stop Out Level (SOL) = (Highest Account Balance - Last Withdrawal) minus MTD.
Example 1: Without Payout
Initial Balance: $100,000
Starting MTD = 5% x $100,000 = $5,000
Initial Stopout Level = $100,000 – $5,000 = $95,000
If your balance grows to $104,000:
New Stopout Level = ($104,000 - $0) – $5,000 = $99,000
If your balance (including floating losses) drops to $99,000 or lower, the account is disqualified.
Example 2: With Payout
Initial Balance: $100,000
Starting MTD = 5% x $100,000 = $5,000
Initial Stopout Level = $100,000 – $5,000 = $95,000
Last Withdrawal = $3,000
If your balance grows to $104,000, and you request a $3,000 payout
New Stopout Level = ($104,000 – $3,000) - $5,000 = $96,000
If your balance (including floating losses) drops to $96,000 or lower, the account is disqualified.