Module 11 · Risk architecture
Drawdown management by account type
A fixed-drawdown account and a trailing-drawdown account need completely different risk architectures. Using the same approach on both will destroy one of them. Here's exactly how to manage each.
At a glance
Account types compared
| Factor | Your own account | Firm · fixed DD | Firm · trailing DD |
|---|---|---|---|
| DD type | Flexible | Static floor | Moving floor |
| Recoverable? | Yes, always | Yes, partially | No — permanent |
| Risk per trade | 0.5–2% | 0.25–0.5% | 0.25–0.5% |
| Daily DD limit | 3–5% | 1–2% | 0.5–1% |
| Danger level | Low | Medium | Extreme |
| Pressure type | Emotional | Rules-based | Math-driven |
Your own account — the core rules
Personal capital has no external drawdown rules, no breach and no account closure — which makes it the most psychologically demanding type, because every consequence is self-imposed and therefore easy to ignore.
- Risk per trade — 1–2% max. At 1% you survive 50 consecutive losses and still hold 60% of capital. Risk = balance × 0.01 (e.g. $5,000 × 1% = $50).
- Daily loss limit — 3% hard stop. When cumulative daily loss hits 3%, trading stops. Close the charts; the market opens again tomorrow.
- Weekly circuit breaker — 5–7%. Past 5% weekly, halve position size for the rest of the week; at 7%, stop until Monday.
- Monthly reset — 10–15%. 10% triggers a full strategy review; 15% means a mandatory 2-week pause, then resume at half size.
Drawdown techniques
- Fixed-fractional sizing: size as a % of current balance, not a fixed lot — risk shrinks automatically as the account does.
- The 3-loss rule: after 3 consecutive losses in a session, stop for the day. You're in emotional mode, not analytical mode.
- Scale down in drawdown: at 5%+ down, cut risk per trade in half. The way out is consistent small winners, not bigger bets.
- Profit protection: after +5% in a month, drop to 0.5% risk to lock the good month in.
- Weekly equity-curve review: erratic curves reveal overtrading; smooth curves reveal discipline.
Pre-session drawdown checklist
Check current balance vs starting balance — know your exact DD% before touching the
charts.
Calculate today's max risk in dollars, not percentage. Write it down.
Check the weekly loss total — are you already in the 5% reduction zone?
Set a broker alert at your daily loss limit. When it triggers, close everything.
Confirm your emotional state. Stressed, anxious or in revenge mode? Don't trade today.
Cap the day at 2–3 trades. Write that number before opening a single chart.
Tool
Own-account drawdown calculator
Enter your balance and risk to get your dollar limits. All math runs in your browser — nothing is stored or sent.
Max $ risk / trade—at your chosen %
Daily hard stop—3% of balance
Weekly alert—5% — halve size
Weekly stop—7% — full stop
Monthly review—10% trigger
Current DD status—your action zone
The own-account trap: the biggest danger with personal capital is the absence of external
accountability — no firm will close your account for you. You have to be the firm. These numbers
are a framework, not financial advice; adapt them to your own plan and risk tolerance.