Introduction
The Equity Trailing Max Loss is a risk management rule used in PipFarm's Instant Program. The Equity Trailing Max Loss is the maximum loss your account can incur before it is breached. Unlike the static drawdown method, which uses a fixed percentage of your starting balance, Equity Trailing Max Loss tracks the high watermark of your account equity.
The max equity trailing drawdown is 6% of your account equity high watermark. If you are Rank 2 or higher, your Equity Trailing Max Loss has an additional 1%. Your account will be breached if your equity exceeds this limit.
High watermark calculation
The high watermark (HWM) equity is the highest value your account equity has reached. Your account equity is affected by open positions. Each time you increase the all-time high of your account equity, the Equity Trailing Max Loss will follow with a 6% distance.
After a payout is requested, the amount withdrawn from the account is deducted from the high watermark equity.
For example, if your high watermark equity is $55,500, your equity trailing max loss limit is $52,170. If $5,000 is withdrawn from your account, your new high watermark equity is reduced to $50,500. Therefore, the trailing max loss equity limit falls to $47,470 and maintains a 6% distance between the adjusted high watermark and your Equity Trailing Max Loss equity limit.
Calculating the Equity Trailing Max Loss limit
You do not need to calculate the Equity Trailing Max Loss limit; it is calculated in real time and displayed on your dashboard.
The calculation for the Equity Trailing Max Loss limit is the following:
HWM Equity - (HWM Equity * 0.06)
Example #1 - closing a profitable position
If your initial balance is $50,000, your initial Equity Trailing Max Loss equity limit is $47,000, which trails your high watermark equity. If you close your first trade with a $500 profit, your high watermark becomes $50,500. Therefore, you cannot lose over 6% of $50,500; your account equity cannot fall below $47,470.
$50,500 - ($50,500 * 0.06) = $47,470
Example #2 - receiving a payout
The Equity Trailing Max Loss recalculates after every payout, allowing traders to enjoy their rewards without fear of losing their accounts. The payout is subtracted from the high watermark equity.
$54,000 - $3,000 = $51,000
$51,000 * 0.06 = $3,060
$51,000 - $3,060 = $47,940
Can I increase my Equity Trailing Max Loss?
Yes. You can increase your Equity Trailing Max Loss by 1% after you achieve Rank 2 in our Experience Program.
Can I breach an account in profit?
Yes. Technically, because of the trailing nature of this rule, you can breach an account while in profit. However, we offer a payout protection feature, allowing you to keep your profits even if you breach an account.