What is Drawdown and how does it work at Ylos Trading?

Drawdown is a financial term that measures the reduction in capital of a trading account, calculating the drop from its highest peak to its subsequent lowest point.

At Ylos Trading, we use it not only as an indicator, but as an essential risk management tool. It establishes clear limits on acceptable losses, ensuring that you operate within safe financial parameters and maintaining the sustainability of your strategy in the long term, even during periods of high volatility.

The way drawdown is calculated varies depending on the phase your account is in:

Challenge Accounts (Evaluation Phase): In challenge accounts (such as Standard, Freedom and No Activation), the drawdown is adjusted at the end of the day, known as Drawdown EOD (End of Day). This means that your loss limit is officially recalculated only at the daily market close. Positive fluctuations that occur throughout the day do not "pull" your loss limit upwards during trading hours.

However, it is very important to keep in mind that maximum loss protection is always active: if at any time of day your balance falls below the drawdown limit, the account will be immediately blocked.

Funded (Master) Accounts: When you upgrade to a funded account, the drawdown becomes a Trailing type, with real-time adjustment. Your loss limit follows the growth of your balance tick by tick. This continuous "drag" happens until you reach a profit equivalent to the total value of your drawdown plus US$100. From that exact point, your drawdown freezes and becomes completely static, no longer increasing, no matter how much your account grows.

Practical Example (Funded Account of US$50,000)

Imagine you have a US$50,000 account with a drawdown of US$2,500. This sets your loss limit (minimum allowed balance) at US$47,500.

If you make a profit of US$500, your balance will rise to US$50,500. As the drawdown follows this peak in real time, your new loss limit rises to US$48,000 (maintaining the US$2,500 distance). Once adjusted upwards, this limit never goes back down.

When your accumulated profits reach US$2,600, your balance will be US$52,600. At this point, you have exceeded the "drawdown value + US$100" rule. Your loss limit will be permanently and statically locked at $50,100.