What drawdown means
Drawdown is the fall from a peak to a later low, usually in percent. If an account grows to $12,000 and then drops to $9,600, the drawdown is 20%, even if the account is still above its $8,000 start. Maximum drawdown is the largest such fall over a period.
Measure it on equity (including open trades), not only balance. A strategy that holds losing positions open while closing winners can show a smooth balance curve and a terrifying equity curve. Equity is what your broker uses for margin calls and what prop firms use for limits.
Why recovery is harder than the loss
| Drawdown | Gain needed to recover |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
| 75% | 300% |
gain needed = 1 ÷ (1 − drawdown) − 1
Losses compound against you. Ten losses in a row at 2% risk each leave you about 18% down, not 20%, but getting back needs about 22%. The drawdown recovery calculator does this for any number.
Account-level rules: EquityShield
Stops limit the loss of a single trade. An account-level rule limits the loss of everything together, whatever the sources do. In CopyTraderTool these rules are called EquityShield and live on each trading account.
| Rule type | Triggers when | Typical use |
|---|---|---|
| Protect value | Equity falls below a fixed amount | A hard floor, e.g. a prop firm's max drawdown line |
| Protect percent | Equity falls a set % below the baseline | "Never more than 15% down from where I started" |
| Daily loss percent | Equity falls a set % below the day's start | Daily limits; re-arms every day at 00:00 UTC |
| Target value / percent | Equity rises to a target | Lock in a challenge pass or a monthly goal |
Each rule has an action: alert by email, alert and pause copiers into that account, or alert, pause and close all positions. The baseline for percent rules can be the starting balance, the current balance or the day's starting equity.
What a protection rule can and can't do
- It reacts to equity as it updates; it doesn't predict. A gap or a news spike can carry equity past the line before positions are closed.
- Closing many positions takes a moment, and each close pays the current spread.
- Pausing copiers stops new trades; with "Manage only" mode, existing copied trades keep being managed while nothing new opens.
- It doesn't fix the cause. If a rule fires, find out why before re-arming it.
For an immediate manual stop there is also STOP ALL, which switches every copier off at once and can close all open positions on your target accounts.
Setting the lines
- Decide the worst drawdown you would accept from this source before you stop copying it. Write it down before the first trade.
- Set a protect-percent rule a little above that line with "pause and close".
- Add a daily loss rule at roughly a third of it, so one bad day can't reach the big line.
- For prop accounts, set every line 1–1.5% inside the firm's limits.
More on prop-firm limits in copying to prop-firm accounts safely.