What are the Drawdown and Total Loss rules at Alpha Trader Firm?
At Alpha Trader Firm, our drawdown and total loss rules are designed to promote effective risk management and safeguard both the traders and the company. Here’s a breakdown of how these limits work:
Daily Drawdown Limit
• *6% Daily Drawdown:* The daily drawdown limit is set at 6% of the higher value between your starting day’s virtual balance or virtual equity.
Your Daily Limit will always be 6% of the Purchased account balance
($100,000 x 6% = $6,000)
Your Daily Drawdown will always be the starting days balance/equity, Depending if there is any negative or positive equity crossed over to the next day you will need to follow your dashboard to know your DailyLossLimit for the day and how it was reset.
Your DailyLossLimit will always be a fixed -6,000 of the starting balance/equity of the previous trading day.
If you start with 102,000 then your daily will reset to match the 6% daily which will be from 102,000 - 6,000 = $96,000
*Key Rule:* - If your account's drawdown exceeds this 6% limit during the trading day, your challenge will be automatically terminated.
Consequences of Breaching the Drawdown Rule
Hard Breach: Breaching the 6% drawdown rule is considered a hard breach. If this limit is breached, the system will terminate the challenge immediately.
Total Loss Limit (Static)
• *11% Total Loss Limit:* This limit is set at 11% of your initial starting balance or equity and remains static throughout the challenge, regardless of account growth or decline.
EXAMPLE:
If your starting balance is $100,000, your total loss limit is $11,000. If your balance drops to $89,000, you will have hit this limit, resulting in automatic account termination.
*Key Rule:* - Once your total losses exceed 11% of your initial balance or equity, your account will be automatically closed.
Drawdown and Total Loss for Instant Funded AccountsFor our Instant Funded Accounts, there is an additional rule designed to encourage disciplined risk management:
• Loss Limit SafeGuard (Maximum Risk Rule) Traders cannot lose more than -1% of the original account purchased balance. Exceeding this limit will result in a hard breach of the account.
This rule applies to each individual position, ensuring traders manage risk effectively while still enjoying the benefits of instant funding with no evaluation phases.
Example:
If you purchase an Instant Funded Account with a balance of $100,000, the -1% Loss Limit would be:
• 1% of $100,000 = $1,000
If any open position incurs a loss exceeding -$1,000, the account will experience a hard breach.
The 1% maximum risk limit rule is designed to help manage risk and protect the account from significant losses. Under this rule, your floating profit and loss (PnL) must not exceed a negative 1% of your total account size at any point. If your floating PnL falls below this threshold, it indicates that your losses have surpassed the allowable limit, and as a result, the account will be closed.
Instant Funding Accounts
Instant Funding accounts have a more streamlined set of risk rules tailored for immediate access to live trading.
Daily Drawdown Limit: 3% of the original account balance.
Total Drawdown Limit: 5% of the original account balance.
Per-Trade Risk Limit: Traders must not risk more than 1% of the account balance in realized or unrealized P&L per open trade.
Example:
For a $50,000 Instant Funding account:Daily Drawdown Limit: $1,500 (3% of $50,000).
Total Drawdown Limit: $2,500 (5% of $50,000).
Per-Trade Risk Limit: $500 (1% of $50,000).
A violation of any of these rules will result in a hard breach, leading to account suspension.
The total drawdown limit for instant funding accounts is trailing .
Importance of the Rules
These rules are crucial for maintaining disciplined trading and protecting your account from excessive losses. By setting clear drawdown limits, we help ensure that traders do not take on undue risk that could jeopardize their trading performance and overall account stability.
This safeguard ensures a balance between trading flexibility and responsible risk management.
Monitoring and Enforcement
Our systems continuously monitor your account to ensure compliance with the Daily 6% Drawdown Rule and the total 11% loss limit. If either limit is breached, appropriate actions will be taken in accordance with our risk management policies.
If you have any questions or need further clarification regarding the Daily 6% Drawdown Rule or the total loss limit, please contact our support team. We appreciate your understanding and cooperation in following these rules to maintain a healthy trading environment.