Maximum drawdown rules apply during both the challenge phase and the funded stage, unless explicitly stated otherwise. Understanding how drawdown is calculated is essential to maintaining account eligibility.
How Maximum Drawdown Works
Maximum drawdown measures the total loss allowed on an account, based on either a static or trailing model, depending on the program.
If your balance or equity falls below the drawdown threshold at any time, the account is breached.
Drawdown includes both closed and floating losses
Balance and equity are monitored at all times
Breaches are enforced automatically
Drawdown Models Used at NSF:
Static Drawdown (Most Challenges)
Most NSF challenges use a static drawdown model.
The drawdown limit is calculated from the initial account balance
The breach level does not move, even if you are in profit
Once breached, the account is closed
Example:
You start with a $100,000 account and a 10% max drawdown.
Your breach level is fixed at $90,000.
Even if you grow the account to $108,000, the breach level remains $90,000.
If equity or balance drops below $90,000 at any time, the account is breached.
Trailing Drawdown (Instant Funded Only)
The Instant Funded model uses a trailing drawdown.
The drawdown level trails upward as your account balance increases
The trail continues until a defined profit threshold is reached
Once reached, the drawdown locks and no longer trails
Example:
You start with $100,000 and a 5% trailing drawdown.
Initial breach level is $95,000.
As your balance grows, the drawdown level moves up with it.
Once your account reaches a set profit level, the drawdown locks at breakeven.
From that point forward, your equity must never fall below the locked level.
What Happens If You Breach the Maximum Drawdown?
Challenge accounts: The account is closed and considered failed
Funded accounts: The account is closed permanently and any remaining profits are forfeited
A drawdown breach does not result in a ban. Traders are always welcome to start again by purchasing a new challenge.
How to Stay Within Drawdown Limits
To manage drawdown effectively:
Always use stop-loss orders
Monitor both balance and equity, not just closed trades
Avoid oversized positions and excessive leverage
Be cautious during high-volatility periods
Keep risk consistent across all trades
Staying within maximum drawdown limits is essential for progressing to funding and maintaining a funded account at NSF. If you’re unsure about your drawdown level, check your dashboard for real-time tracking or contact NSF support via nextstagefunded.com.