How Does the Maximum Daily Drawdown Limit for the 1-Step Infinity Evaluation Work?

The Maximum Daily Drawdown Limit for the 1-Step Infinity Evaluation is 3% of the Initial Balance.

Example 1:

For a $40,000 1-Step Infinity Evaluation, the Daily Drawdown is 3% of the Initial Balance.

Day 1:

Starting Balance/Equity: $40,000
Allowed Daily Drawdown: 3% of $40,000 = $1,200 (stop-out limit = $38,800)

Example 2:

Day 2:

End of Day Balance (Day 1): $44,000
End of Day Equity (Day 1): $43,000

At 5 PM ET, if unrealised positions are open, 3% of the Initial Balance will be deducted from the higher of the two values (Balance or Equity).

In Example 2 above, since Balance is higher than Equity, the stop-out limit will become:

$44,000 – (3% of $40,000) = $44,000 – $1,200 = $42,800

If either Equity or Balance reaches this limit, it will result in a breach of the Daily Drawdown Limit.

Example 3:

Day 3:

End of Day Balance (Day 2): $41,000
End of Day Equity (Day 2): $46,000

In Example 3 above, since Equity is higher than Balance, the stop-out limit will become:

$46,000 – (3% of $40,000) = $46,000 – $1,200 = $44,800

Since the Balance of $41,000 is lower than the stop-out limit of $44,800, this will cause an immediate breach of the Daily Drawdown Limit.

Breaching this limit will cause the account to be violated, closed, and disabled for trading.