How do trailing drawdowns/Thresholds work?

Key Takeaway (Start Here) #

• The Trailing Drawdown (Auto Liquidate Threshold) adjusts upward intraday as your account reaches new highs — including unrealized profits.
• If your balance drops below this threshold, your account is auto-liquidated and marked as failed.

🛡 Want more room to trade? Add Drawdown Protection during checkout to increase your trailing drawdown limit.

📘 What is the Trailing Drawdown? #

The Trailing Drawdown is a real-time limit that follows your account’s highest balance (including open PnL) during the day. It ensures risk control by setting a floor you must stay above — and if you breach it, the account fails.

🛡️ What is Drawdown Protection (Add-on)? #

Drawdown Protection is an optional add-on that increases the size of your trailing drawdown — giving you more space between your balance and the threshold.

• Can be purchased at checkout
• Available for the Warrior Phase and carries over into the Gladiator Phase if already added. It is also available for Instant Gladiator accounts.
• It does not remove the trailing drawdown — it just increases the limit.

Trailing drawdowns are designed to support disciplined risk management, helping you maintain your account balance while progressing through the evaluation and payout stages.

🛠️ How It Starts & Moves #

• Each account starts with a predefined trailing drawdown limit, based on the account size and whether you’ve purchased Drawdown Protection (an optional add-on).
• However, this value is not fixed. Instead, it trails behind your highest account balance for the day — including unrealized gains — maintaining a set distance from the Auto Liquidate Peak Balance on Rithmic.
• Important: The trailing drawdown will only trail up to a maximum of your starting balance + $100. Once this level is reached, it will no longer trail further, even if your balance continues to rise.
• Example 1: If your drawdown is $2,500 on a 50K account, and you reach a peak balance of $52,000 (even if unrealized), your trailing threshold will automatically move up to $49,500.
• Example 2: If your peak balance reaches $55,000 and your trades are closed, your trailing threshold will still remain capped at $50,100 — the maximum allowed based on a $50,000 starting balance. Even though you made more, the trailing does not move beyond that cap.

⚠️The trailing threshold only moves upward intraday, never downwards — even if your balance later drops.

📍 Where to See It Live in Rithmic #

In R|Trader Pro, go to Trader Dashboard to track:

• Auto Liquidate Peak Balance – the highest balance of the day, including open (unrealized) PnL.
• Auto Liquidate Threshold Value – the live trailing drawdown limit, based on your peak balance.

These values update in real-time and are critical to monitor during trading.

Example Scenarios #

Example 1: Basic Drawdown (No Profits Made) #

• You’ve just purchased a new 50K account with a $2,500 trailing drawdown
• This means your failure threshold is: $50,000 (starting balance) – $2,500 (drawdown) = $47,500

This means that if your account equity (your current balance including open/unrealized PnL) falls below $47,500 at any time, your account will be automatically liquidated and marked as failed.

This applies even if you haven’t made any profits yet. The drawdown threshold starts from your initial balance and remains in place until your account equity increases.

Example 2: How Drawdown Adjusts with Peak Equity (“High Watermark”) #

1. You open your first trade on a newly purchased 50K account

• Your trade goes into $1,500 of floating (unrealized) profit.
• Even though you haven’t closed the trade, your account equity has reached $51,500.

At this point, your trailing drawdown adjusts based on that peak equity: $51,500 – $2,500 = $49,000

This is your new drawdown limit. Falling below $49,000 in equity will result in account failure — even if you haven’t realized the profit.

2. You close the trade for $1,000 profit

• The market pulls back before you close the trade.
• You exit with a $1,000 profit, so your realized balance is now $51,000.

⚠️ Important: The drawdown was already calculated when your equity reached $51,500, so it remains at $49,000. We do not recalculate the drawdown based on the final closed balance.

3. Next day, you take a new trade

• You start the day with a $51,000 balance.
• You open a new position, and it reaches $1,000 in floating profit.
• Your peak equity is now: $51,000 + $1,000 = $52,000

This sets a new drawdown level: $52,000 – $2,500 = $49,500

📌 Your account can now go no lower than $49,500 in equity without failing.

4. You close the trade for $500 profit

• Your updated balance is now $51,500.
• However, your drawdown threshold is still tied to the highest point your equity reached — $52,000 — not your closing balance.

✅ The drawdown remains at $49,500, even though your final balance is $51,500.

⛔ What happens if I drop below the threshold? #

If your account balance (including unrealized PnL) drops below the Auto Liquidate Threshold Value, the account is automatically liquidated and marked as failed.