The most common risk management error we see is a failure of EOD trailing drawdown. The good news is that we have simplified this rule for test accounts to be calculated at the end of the day, instead of in the middle of each trade.
Included in the table is the value for EOD trailing drawdown, and below you will see a diagram to explain a visual of how EOD trailing drawdown works.
|Futures Account Size||Maximum Position Size||Profit Target||Daily Loss Limit||Maximum Trailing Drawdown|
|Stock Account Size||Maximum Position Size||Profit Target||Daily Loss Limit||Maximum Trailing Drawdown|
In the Control Center, you will see the maximum trailing drawdown built into the metric "Minimum account balance".
In the diagram you see a $25,000 account. The Maximum trailing drawdown for a $25,000 account is $1,500. Therefore, the minimum account balance starts at $23,500 ($25,000 - $1,500 = $23,500).
It is called "Trailing" because the minimum account balance will "Trail" the account balance as it goes higher. If you make $1,000 on the first trading day, your balance will be $26,000 and your minimum account balance will move to $24,500.
In this case, the minimum account balance will continue to "Trail" $1,500 behind your HIGHEST end of day account balance until it reaches $25,000. Once the minimum account balance reaches the starting point for the account, it will no longer "Trail" your account higher.
To get a simple idea of how it works, see the figure below:
If you at any point reach the Minimum Account Balance, it will result in the liquidation of your account.