The 5%ers Trailing Drawdown Rule Explained
One of the most important rules in The 5%ers challenge is the trailing drawdown. This dynamic rule adjusts your maximum allowable loss based on your account’s peak equity, providing a moving safety net that protects both you and the firm’s capital.
What is the Trailing Drawdown?
The trailing drawdown sets a floor for your account equity relative to its highest balance. As your account grows, this floor moves up accordingly. If your equity falls below this floor, you breach the rule and risk losing your funded status.
How It Operates in The 5%ers
Initially, your trailing drawdown may be set at 5% below your starting balance. As you make profits, the drawdown floor “trails” your new highs, always staying 5% below the peak equity. This mechanism encourages disciplined trading and capital preservation.
Managing Your Trailing Drawdown
- Use conservative position sizing to avoid large setbacks.
- Take profits regularly to raise your equity and drawdown floor.
- Monitor your account’s equity closely via The 5%ers dashboard.
Consequences of Breaching the Rule
Violating the trailing drawdown rule results in immediate termination of your challenge or funded account. Therefore, strict adherence is critical for success.
Summary
Understanding and respecting The 5%ers trailing drawdown rule protects your capital and ensures longevity in funded trading. Stay disciplined, monitor your equity, and manage risk carefully to remain compliant.