The Maximum Drawdown limit represents a point in the trading account’s equity, down to which the client is allowed to drop before the trading account is disqualified.

It is calculated as: Maximum Drawdown Limit = Initial Balance – Initial balance * Percentage

For example, the maximum Drawdown is 8%, and the account initial balance is 50 000. The calculation is therefore 50 000 – 50 000*8%.  This means that if the account’s equity reaches 46 000, the account has breached this hard rule and will be suspended.

If the client is profitable and made a profit of 3000 and the balance is now 53000, the maximum drawdown limit remains at equity of 46 000. Client can therefore lose 7000 before being disqualified.