How is the Maximum Simulated Drawdown calculated in the Lightning Challenge/Funded?
Note: The Maximum Drawdown Limit is a fixed limit set at 6% of your initial account balance. It is calculated once when the account starts and never changes, so the dollar amount depends only on your account size. All examples in this section use a $100,000 account, where the limit is $6,000. The rules, formulas, and breach level calculations work the same way for every account size.
The rule at a glance
| Item | Rule |
|---|---|
| Maximum Drawdown Limit | 6% of the initial account balance. This is a fixed amount that never changes. |
| Type | Trailing, based on your highest balance. The breach level only moves when trades are closed. |
| Formula | Breach Level = Peak Balance − Maximum Drawdown Limit ($6,000 on $100K) |
| Direction | The breach level only moves up, never down |
| Lock | Once balance reaches +6% ($106,000 on $100K), the breach level locks permanently at the initial account balance |
| What is checked | Equity and balance are checked against the breach level at all times, including floating P&L on open trades, simulated commissions, and swaps |
| If breached | Hard breach. The account is terminated immediately. |
Limit and lock level by account size
| Account Size | Maximum Drawdown Limit (6%) | Day-One Breach Level | Locks When Balance Reaches | Locked Breach Level |
|---|---|---|---|---|
| $5,000 | $300 | $4,700 | $5,300 | $5,000 |
| $10,000 | $600 | $9,400 | $10,600 | $10,000 |
| $25,000 | $1,500 | $23,500 | $26,500 | $25,000 |
| $50,000 | $3,000 | $47,000 | $53,000 | $50,000 |
| $100,000 | $6,000 | $94,000 | $106,000 | $100,000 |
What is the trailing drawdown?
- The trailing drawdown is a fixed limit of 6% of the initial account balance ($6,000 on a $100,000 account).
- It follows your highest balance upward. The breach level only moves when a trade is closed and your balance reaches a new high.
- It stays $6,000 below your peak balance until the lock is reached.
- Once your balance reaches $106,000, the breach level locks permanently at $100,000 (the initial account balance) and stops trailing.
Balance vs equity
- Balance updates only when a trade is closed.
- Equity moves in real time and includes floating P&L from open trades.
- The breach level is set by your highest balance, but your equity and balance are always checked against it.
- Floating profits do not move the breach level until the trade is closed. Floating losses can still breach your account, even when your balance looks healthy.
How the breach level is calculated
Breach Level = Peak Balance − Maximum Drawdown Limit ($6,000 on a $100,000 account)
In the table below, Room to Breach assumes you have no open trades, so your equity equals your peak balance.
| Peak Balance Reached | Breach Level | Room to Breach | Status |
|---|---|---|---|
| $100,000 | $94,000 | $6,000 | Trailing |
| $102,000 | $96,000 | $6,000 | Trailing |
| $104,000 | $98,000 | $6,000 | Trailing |
| $106,000 | $100,000 | $6,000 | Locked permanently |
| $120,000 | $100,000 | $20,000 | Still locked at $100,000 |
When does the drawdown lock?
- Once your balance reaches $106,000 on a $100,000 account, the breach level locks at $100,000 permanently, no matter how high your balance grows afterward.
- The lock is triggered by balance, not equity, so it only happens when trades are closed.
- Once triggered, the lock cannot be undone.
Do floating profits affect the drawdown?
No. Floating profits raise your equity, but the breach level only moves when the trade is closed and your balance increases.
Example:
- Your balance is $102,000, so your breach level is $96,000.
- An open trade is floating +$4,000, so your equity is $106,000.
- The breach level stays at $96,000 and the lock does not trigger.
- If you close the trade at +$4,000, your balance becomes $106,000 and the breach level locks at $100,000.
- If the trade reverses and closes at breakeven, your balance stays at $102,000 and the breach level stays at $96,000.
Do floating losses affect the drawdown?
Yes. Even though the breach level is based on balance, your equity and balance are always checked against it. Floating losses reduce your equity in real time and can breach your account even when your balance looks healthy.
Example:
- Your balance is $105,000, which is also your highest balance, so your breach level is $99,000.
- An open trade reaches a floating loss of $6,000 or more.
- Your equity touches or falls below $99,000, and the account is terminated immediately, even though your balance still shows $105,000.
What about multiple open trades?
- All open trades are combined into a single equity figure, and that equity is checked against the breach level.
- A floating gain on one trade can be wiped out by a larger floating loss on another.
- Floating gains do not raise the breach level until the trades are closed.
Example:
- Your balance is $103,000, which is also your highest balance, so your breach level is $97,000 ($103,000 − $6,000).
- Trade A is floating +$2,000 and Trade B is floating −$5,000.
- Your net floating loss is −$3,000, so your equity is $100,000. The account is safe for now.
- If your net loss grows by another $3,000 or more, your equity touches or falls below $97,000 and the account is breached.
How do withdrawals affect the drawdown?
- You can only request a withdrawal when all trades are closed, so at the time of the request your balance and equity are the same.
- The breach level is set by your peak balance and does not change when you withdraw.
- A withdrawal reduces your balance and equity by the same amount, which shrinks the room between your equity and the breach level.
Example:
- Your balance peaks at $102,000, so the breach level is set at $96,000.
- With all trades closed, your balance and equity are both $102,000.
- You withdraw $2,000, and your balance and equity both drop to $100,000.
- The remaining room is $100,000 − $96,000 = $4,000. The breach level stays at $96,000, but you now have only $4,000 of room before termination.
| Peak Balance | Breach Level | Balance = Equity Before Withdrawal | Withdrawal | Balance = Equity After | Room Remaining |
|---|---|---|---|---|---|
| $102,000 | $96,000 | $102,000 | $2,000 | $100,000 | $4,000 |
| $105,000 | $99,000 | $105,000 | $3,000 | $102,000 | $3,000 |
| $106,000 | $100,000 (locked) | $106,000 | $6,000 | $100,000 | $0 — Equity touches the breach level, so the account is breached |
The same withdrawal example across all account sizes (all trades closed, balance = equity at the peak of +2%, withdrawal of 2% or the $100 minimum, whichever is higher)
| Account Size | Peak Balance | Breach Level | Balance = Equity Before Withdrawal | Withdrawal | Balance = Equity After | Room Remaining |
|---|---|---|---|---|---|---|
| $5,000 | $5,100 | $4,800 | $5,100 | $100 | $5,000 | $200 |
| $10,000 | $10,200 | $9,600 | $10,200 | $200 | $10,000 | $400 |
| $25,000 | $25,500 | $24,000 | $25,500 | $500 | $25,000 | $1,000 |
| $50,000 | $51,000 | $48,000 | $51,000 | $1,000 | $50,000 | $2,000 |
| $100,000 | $102,000 | $96,000 | $102,000 | $2,000 | $100,000 | $4,000 |
What causes immediate termination?
- Your account closes the moment equity touches or falls below the Maximum Drawdown Breach Level.
- This can be caused by:
- Floating losses on open trades
- Closed losses
- A withdrawal that brings equity to or below the breach level
- The Daily Loss Limit is a separate rule and is explained in the Lightning Daily Drawdown article.
Remember
- The breach level only moves when your balance changes, but your equity and balance are checked against it at all times.
- Floating profits do not raise your breach level or trigger the lock until the trade is closed.
- The Maximum Drawdown Limit is always 6% of your initial account balance and never changes.
- After the lock, your room to breach grows as your balance rises above the initial account balance.
Was this article helpful?
Still need help?
Contact our support team. Email inquiries are accepted 24 hours a day. Replies are sent during business hours.