How is the Daily Simulated Drawdown calculated in the Dual Step Challenge/Funded?

The Dual Step Challenge is designed to evaluate traders with disciplined risk management. It offers two types of daily drawdown models to suit different trading styles. Only one drawdown type applies per account, determined at the time of purchase.
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1. Equity-Based Drawdown (Default)

This is the default and recommended option. The 4% daily drawdown is calculated based on your Daily Starting Equity (balance + any floating P/L as of 5 PM EST). The next day’s loss limit and threshold are set from this equity figure and reset every day.
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2. Balance-Based Drawdown (Optional Add-On)

This model is available as a paid Add-On and costs 30% extra on the base price of the challenge. If selected, the 4% daily drawdown is calculated based on your Daily Starting Balance only (excluding any floating P/L as of 5 PM EST).
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The drawdown is recalculated and resets daily at 5 PM EST.
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Below is the detailed explanation of both drawdown types, with practical examples to help you understand how each model works.

Daily drawdown is calculated based on Daily Starting Equity (balance + floating P/L at 5 PM EST).
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​Note: All examples below are based on a $100,000 account for easier understanding. The same logic applies proportionally to other account sizes.
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​Example 1: Starting Equity Drawdown

Consider an account that starts the day with a $100,000 equity (balance + floating P/L). With a set daily drawdown limit of 4%, the permissible loss for the day amounts to $4,000, setting the threshold at $96,000. Any drop in equity (realized or unrealized) below this level will result in a drawdown violation.
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Example 2: Net Profit Impact on Drawdown

If a trader earns $3,000 in profit, the end-of-day equity becomes $103,000. The next day, the drawdown limit will be 4% of $103,000 = $4,120, and the threshold will be $98,880. As the equity grows, the risk buffer increases for the following day.
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Example 3: Net Loss Impact on Drawdown

If a trader loses $3,000, reducing the equity to $97,000, the next day’s 4% drawdown will be $3,880, setting the threshold at $93,120. As equity decreases, so does the allowable loss for the next day.
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Example 4: Effect of Floating Profits

If a trader has an unrealized profit of $2,000, the starting equity becomes $102,000. The drawdown limit is then $4,080, with a threshold at $97,920. A breach will occur if the equity falls below this point—even if profits are floating.
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Example 5: Impact of Floating Losses

If there’s a floating loss of $2,000, the equity becomes $98,000, reducing the drawdown limit to $3,920, and the threshold to $94,080. The daily drawdown adjusts accordingly to limit excessive risk exposure.
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Daily drawdown is calculated from Daily Starting Balance only (excluding floating P/L), locked at 5 PM EST.
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​Note: All examples below are based on a $100,000 account for easier understanding. The same logic applies proportionally to other account sizes.
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Example 1: Starting Balance Drawdown
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Consider an account that starts the day with a $100,000 balance. With a set daily drawdown limit of 4%, the permissible loss for the day amounts to $4,000. This sets the account’s lower threshold at $96,000. Any drop below this, whether due to realized losses (net losses) or unrealized losses (floating losses), would breach the drawdown rule.
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​Example 2: Net Profit Impact on Drawdown
In a scenario where a trader’s account increases from $100,000 to $103,000 due to a $3,000 profit from closed trades, the drawdown calculations are adjusted the following day. Starting with a new balance of $103,000, a 4% drawdown allows a higher loss limit of $4,120, thus setting the new threshold at $98,880. As the balance increases through profits, the absolute dollar amount the trader can lose before breaching the drawdown limit also rises.
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​Example 3: Net Loss Impact on Drawdown
Conversely, if a trader ends the day with a $3,000 loss, bringing the account down to $97,000, the following day’s calculations also adapt. A 4% drawdown on the reduced balance sets the loss limit at $3,880, lowering the threshold to $93,120. As the account balance diminishes from losses, the permissible loss in dollar terms decreases, tightening the financial leash for the next trading day.
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​Example 4: Effect of Floating Profits
If a trader has an open position showing an unrealized profit of $2,000, the equity would total $102,000. However, the drawdown calculations continue to consider the starting balance of $100,000. Consequently, the loss limit remains at $4,000, setting the threshold at $96,000. Should the equity fall beneath this level, it would trigger a violation of the drawdown rules. This maintains a buffer that allows the trader to absorb up to $6,000 in losses without breaching the limit, considering both the unrealized profit and the original drawdown rule.
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​Example 5: Impact of Floating Losses
Similarly, if there is an ongoing position with an unrealized loss of $2,000, this affects the equity, reducing it to $98,000 while the balance remains $100,000. The 4% drawdown is computed from the balance, thus maintaining the loss limit at $4,000 and the threshold at $96,000. In this situation, the trader has a reduced margin of only $2,000 for further losses before falling foul of the drawdown regulations.
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Each of these scenarios highlights how daily profits, losses, and unrealized gains or losses interact with the specific drawdown rules of the Dual Step Challenge, affecting financial strategy and risk management from one trading day to the next.
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​Note: Please ensure that your equity and balance do not fall below the daily loss limit or maximum loss limit, whether due to floating losses on open trades or realized losses on closed trades. Breaching these limits will result in the termination or cancellation of your account.
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Platform-specific rules are outlined below:
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