Overview
Static Drawdown, also known as absolute drawdown, offers a fixed drawdown level based on your initial starting balance. This type of drawdown remains constant, regardless of account peaks or trading gains. Static Drawdown is well-suited to traders who prefer straightforward risk limits that do not change with account performance, providing predictability and a clear-cut risk threshold.
How it works
With Static Drawdown, your maximum loss level is set at the beginning and remains unchanged. For example, if you start with a $100,000 simulated account and a Static Drawdown of $10,000, your Maximum Drawdown level will always be $90,000.
Unlike Relative Drawdown, Static Drawdown does not adjust with account highs or new closed balance peaks, so you have a stable reference point for risk regardless of gains. This approach helps traders focus on longer-term growth without frequent adjustments to the drawdown limit.
Example
For a $100,000 simulated account with a Static Drawdown of 10%:
Starting Balance: $100,000
Maximum Drawdown: $90,000 (set at 10% of the starting balance and does not move)
The Maximum Drawdown remains $90,000 even if the simulated account balance grows beyond $100,000, making Static Drawdown a simple and predictable way to manage risk.