Screenshot_8.png

AN INSIGHT
TO DAY TRADING

UNDERSTADING THE TRAILING DRAWDOWN: Leeloo, Earn2Trade, UProfit


Funded account providers like Leeloo, Earn2Trade or UProfit have various rules implemented that traders need to respect. Depending on the provider those rules may differ, however, one rule they all have in common is the trailing drawdown. This parameter plays a key role with all accounts and the following article takes a closer look on that topic illustrating how the various providers handle their trailing drawdown.


Originally, the term “trailing drawdown” was created by the funded account providers themselves to have a name for their implement parameter. It describes an automatically adjusting stop loss for the trading account that is never moving down. If that stop loss gets hit the trading account will be eliminated.


If a trader keeps a $100k trading account, it usually comes with a trailing drawdown around $3k. At that point, the account balance is $100k and the trailing drawdown stop loss is at $97k ($100k – $3k). If the trader executes a $2k profit trade, both the account balance moves up to $102k ($100k + $2k) and the trailing drawdown moves up to $99k ($97k + $2k). However, if the trader now executes a $1k loss trade, only the account balance moves down to $101k ($102 - $1k) – the trailing drawdown stop loss does not move lower and remains at its $99k level. The trailing drawdown continues moving up as soon as the trader exceeds the initial $3k difference between the account balance and trailing drawdown balance.



The trailing drawdown has been implemented by the account providers to check a trader’s consistency and, ultimately, become a funded trader. It plays a crucial role in passing an evaluation and must be respected in the individual trading plan. The trailing drawdown will stop at certain account balance depending on the provider.


LEELOO TRAILING DRAWDOWN

The funded account provider Leeloo utilises an intraday calculation of their trailing drawdown which means the drawdown is adjusted in real-time including unrealised profits.

Leeloo allows a max. drawdown of $3k with their $100k account, consequently, the initial drawdown level is $97k. If a trader executes a trade that spikes up at an unrealised peak profit of $2k but is closed with a final profit of $1k the account balance moves up to $101k, however, since the unrealised intraday profit was already at $2k the trailing drawdown level moves up to $99k.


The trailing drawdown remains valid through the entire evaluation and will never stop during this phase. Once switched to a funded account, the trailing drawdown stops at the initial account balance +$100. In the above example that would be as soon as the trailing drawdown reaches the threshold of $100,100.


In addition, Leeloo offers the account type “Glide” respectively “Accelerator” which is the only account option among the funded account providers without a trailing stop and is further explained in the Leeloo review.


EARN2TRADE TRAILING DRAWDOWN

Earn2Trade calculates their trailing drawdown on an end of day basis (EOD) during the evaluation which means the drawdown is adjusted at the end of the trading day.


This account provider allows a max. drawdown of $3,500 with their $100k account. Therefore, the trailing drawdown starts at $96,500. If a trader enters a trade that moves up reaching an unrealised profit peak of $2k but is closed with an eventual profit of $1k the account balance moves up to $101k since trailing drawdown is adjusted at the end of the day, it moves up by the actual profit respectively $1k in this example. However, Earn2Trade also has a daily loss limit in place which needs to be respected during the trading day. Here, a trader can move below the daily loss threshold during the day but must be above that level at the end of the day.


During the evaluation the EOD trailing drawdown does not stop and remains valid the entire phase. Earn2Trades then distinguishes between a “LiveSim” account which follows an end of day drawdown as known from the evaluation and a “Live” account which follows an intraday drawdown considering unrealised profits as well as known from Leeloo. Here, the trailing drawdown continues until the drawdown level reaches the initial account balance and stops at that value. In the above example that would be as soon as the trailing drawdown reaches the threshold of $100k. The accounts and procedures among those are further described in the Earn2Trade review.


UPROFIT TRAILING DRAWDOWN

The funded account provider UProfit has an end of day trailing drawdown (EOD) in place during the evaluation which means the drawdown is adjusted at the end of the trading day. Their procedure is identical to the previous mentioned one with Earn2Trade.


UProfit Trader allows a max. drawdown of $3k with their $100k account. Consequently, the trailing drawdown starts at $97k. If a trader executes a profitable trade reaching an unrealised profit peak of $2k but exited with a final profit of $1k the account balance moves up to $101k. Since the trailing drawdown is adjusted at the end of the day, the drawdown level moves up by the $1k realised profit respectively to $98k in this example. However, UProfit also has a daily loss limit in place which needs to be respected during the trading day. Here, a trader can move below the daily loss threshold during the day but must be above that level at the end of the day.


The EOD trailing drawdown remains valid the entire evaluation and does not stop at any time during this phase. As soon as the trader receives the funded account, that calculation approach is switched from end of day to real-time including unrealised profits as known from Leeloo.


Once trading a funded account with UProfit the trailing drawdown continues until it reaches the threshold of the initial account balance and will not move any higher than that. In the above example that would be as soon as the trailing drawdown reaches the threshold of $100k. Other account sizes and the funded account provider itself are further described in the UProfit review.