Understanding the Trailing Drawdown Rule at Elite Trader Funding
In the world of prop trading, managing risk is paramount to long-term success. Elite Trader Funding incorporates a trailing drawdown rule as a vital risk management mechanism to protect both the firm’s capital and traders’ funded accounts. This article explains in detail what the trailing drawdown is, how it works, and tips on managing your trades effectively under this rule.
What is a Trailing Drawdown?
A trailing drawdown is a dynamic loss limit that adjusts upward as your account equity reaches new highs but does not decrease if your equity falls. Essentially, it “trails” your highest peak and sets a floor below which your account cannot fall without triggering a breach.
How Elite Trader Funding Implements Trailing Drawdown
Elite Trader Funding sets an initial drawdown level based on your starting account balance. As your trading profits accumulate and equity peaks rise, the drawdown threshold moves up accordingly. This encourages traders to lock in gains and trade with discipline, ensuring that profits are protected against subsequent losses.
Consequences of Breaching the Trailing Drawdown
If your account equity falls below the trailing drawdown level, you will be disqualified from the funded program or evaluation, depending on your account stage. Maintaining your equity above this limit is critical.
Strategies to Manage Trailing Drawdown
- Implement strict stop-loss orders to protect profits and limit losses.
- Avoid high-risk trades as your equity approaches new highs to safeguard your trailing drawdown.
- Maintain consistent position sizing aligned with your risk tolerance.
- Regularly review your trading journal and performance metrics.
Conclusion
Understanding and respecting the trailing drawdown rule at Elite Trader Funding is essential for any trader aiming to pass the evaluation and grow their funded account sustainably.