What Is the Trailing Drawdown?
The trailing drawdown is a risk management mechanism designed to limit overall losses while allowing your account to grow. In the 1 Phase Challenge, it is set at 6% of your starting balance.
The drawdown trails your balance upward as you make profits.
Once your balance grows by 6% or more, the drawdown locks at your initial balance and no longer increases.
How It Works
Starting Point: The drawdown begins at 6% below your initial account balance.
Trailing Upward: As your account grows, the drawdown level rises.
Locking: When your balance increases by at least 6%, the drawdown locks at your starting balance.
Example Without Growth
Starting Balance: $10,000
Trailing Drawdown: $600
If the balance drops below $9,400 → challenge fails.
Example With Growth (After Locking)
Balance grows to $12,000 → Max loss is $2,000
Once locked at $10,000, dropping below that balance results in failure.
Impact on Payouts
The trailing drawdown continues to apply once you move into a funded account. Key considerations:
Profits must be earned while remaining above the drawdown threshold.
If you breach the drawdown, the account is closed, and payouts are forfeited.
Maintaining a safe buffer above the drawdown level increases your likelihood of consistent payouts.
Why It Matters
The trailing drawdown ensures that traders demonstrate risk management while scaling profits. It allows for growth while enforcing discipline, making it a key factor in long-term trading success at TX3 Funding Forex.