What it Means:
- The Account Loss Limit is best thought of as a minimum account balance. There is a pictorial representation of all of the following information at the bottom of the page. The Account Loss Limit for the $300,000 Trading Combine® Step 1 account is $2,000. This means that when you start the account, your balance cannot drop below $298,000 for that account. If you add profits, the Account Loss Limit also moves higher to be $2,000 below your highest realized account balance. The Account Loss Limit will never be more than the original amount, which in this case is $300,000.
- In the Trading Combine Steps 1 and 2, this is calculated intraday based off of your realized and unrealized P&L. If you violate the Account Loss Limit, any open trades will not auto-liquidated, however your account will become ineligible for a Funded Account™.
- The Account Loss Limit is calculated from your realized intraday account balance high. So, if you make $500 on your first trade in the $300,000 account, your account balance will be $300,500 which will make your Account Loss Limit $298,500 ($2,000 from the account balance high). If you were to lose $500 on the next trade your account balance will go back to $300,000, but your Account Loss Limit would remain at $298,500. Your minimum account balance can not fall below $298,500 for the remainder of the evaluation period.
Once the Account Loss Limit reaches the initial starting balance of your account (in this case $300,000), the minimum account balance will remain static for the remainder of your evaluation period. This means that if you were to make $2,500 over the next few trades and your account balance is $302,500, your Account Loss Limit will move up to $300,000 and stay there for the duration of the evaluation.
Why it is Important:
- Allows you to recognize and reevaluate when your strategy is not working in current market conditions.
- Encourages smart account management.