What type of Drawdown is the 1st Phase (Trading Challenge) ?

The 1st Phase (Trading Challenge) at Pivex uses static drawdowns to maintain consistent risk management throughout the challenge. These drawdown limits are designed to help traders develop stable and disciplined trading practices.

Drawdown Types:

Daily Drawdown:

• 4% of your current equity (calculated at the start of each trading day).
• This means that every day, the drawdown limit is calculated based on the equity value at the beginning of that day, not the initial account balance.

Example:

If your equity at the start of the day is $100,000, the daily drawdown limit is $4,000. If your equity increases to $110,000 on another day, the new daily drawdown limit  becomes $4,400 (4% of $110,000). If your equity decreases to $95,000, the drawdown limit will be $3,800 (4% of $95,000).

Overall Drawdown:

• 6% of your starting balance (measured at any point during the challenge).
• This drawdown does not change, even if your equity grows.

Example:

If you start with a $100,000 account, your max overall loss is $6,000. Your balance must not fall below $94,000 at any time during the challenge.

Why Do Drawdowns Happen?

Drawdowns occur when your account value decreases due to losses from trades. These losses can happen for various reasons, including:

Market Volatility:

• Unexpected price movements, especially in volatile markets like cryptocurrencies or stocks, can lead to significant losses.

Overleveraging:

• Using excessive leverage magnifies both profits and losses, increasing your risk exposure.

Poor Risk Management:

• Failing to set stop-loss orders or managing trades without considering risk can result in large losses.

How to Avoid Exceeding Drawdown Limits:

Use Proper Position Sizing:

• Risk no more than 2% of your balance on each trade to keep losses manageable.
• Example: For a $100,000 account, limit your risk to $2,000 per trade.

Set Stop-Loss Orders:

• Always use stop-loss orders to automatically close your trades at a predetermined loss level.
• This prevents your positions from going too far against you.

Avoid Overleveraging:

• Use leverage responsibly.
• Example: With a $10,000 account, avoid controlling a $100,000 position, as this can quickly deplete your balance if the market moves against you.

Track Market Conditions:

• Stay updated on market trends and economic events.
• Avoid trading during high volatility periods, especially around major news releases.

Example of Drawdown Calculation:
Starting Balance: $100,000
Max Daily Loss: 4% of current equity
Max Overall Loss: 6% of starting balance


Scenario 1: Daily Drawdown
Day Start Equity: $100,000
Max Daily Loss: $4,000
If your equity drops to $96,000 in one day, the daily drawdown limit is breached.


Scenario 2: Overall Drawdown
Starting Balance: $100,000
Max Overall Loss: $6,000
If your equity at any point falls below $94,000, your challenge is considered  unsuccessful.

Consequences of Exceeding Drawdown Limits:

If you breach either the daily drawdown or overall drawdown limits, your Challenge will be considered unsuccessful, and you will not be able to proceed to the Pivex Traders Stage (Funded Trader Stage).

• To continue, you would need to purchase a new Challenge.
• The system will notify you immediately if a drawdown limit is violated, and your account will be closed.

Tips to Stay Within Drawdown Limits:

Monitor Your Equity:
Since the daily drawdown is based on current equity, regularly check your balance  at the start of each trading day.

Maintain Discipline:
Stick to your trading strategy and avoid emotional decisions.

Track Your Trades:
Use the MatchTrader platform to monitor your open positions and equity changes.

Apply Risk Management Techniques:
Use trailing stops to lock in profits while minimizing risk.

Maintaining discipline and understanding how drawdowns are calculated will help you stay on track during the Trading Challenge. By keeping your losses under control, you increase your chances of progressing to the Funded Trader Stage and earning real payouts.

If you need further guidance on drawdown management or risk strategies, our support team is always here to assist you!