At CoveFunded, the Maximum Overall Drawdown Limit is a critical aspect of managing risk across different account types and challenges. Here’s how it applies:
- One-Phase Challenge: The Maximum Overall Drawdown Limit is set at 10% of your account’s initial equity balance. This means that throughout the duration of the challenge, your account cannot incur losses exceeding 10% of its starting balance. If this limit is breached, the challenge will be considered unsuccessful.
- Two-Phase Challenge: Similar to the One-Phase Challenge, the Maximum Overall Drawdown Limit for the Two-Phase Challenge is also 10% of the initial account balance. This ensures that even over the course of a more extended and potentially more challenging evaluation process, traders must maintain strict discipline to avoid significant losses.
- Swing Account: The Maximum Overall Drawdown Limit for Swing Accounts is likewise set at 10% of the account’s initial equity balance. Swing traders, who typically hold positions for longer periods, must adhere to this limit to ensure they do not deplete their account balance by more than 10%.
Example : Imagine you have started a One-Phase Challenge with CoveFunded, and your initial account balance is $100,000. The Maximum Overall Drawdown Limit is set at 10%. This means the maximum amount you can lose across the entire challenge is $10,000.
If, over several days or weeks of trading, your account balance drops to $90,000 (which is a 10% loss of the initial $100,000), you have hit the Maximum Overall Drawdown Limit. At this point, you would fail the challenge, as the rules do not allow your account to drop below this threshold.
This example highlights the importance of managing your trades carefully and keeping an eye on your overall losses to stay within the allowed limits and succeed in the challenge.
