The maximum drawdown starts 6% below your starting balance and moves up as your closed balance reaches new highs (high-water mark). If your equity falls below this level at any time, your account is closed.
Once you achieve a 6% gain based on your closed balance, the drawdown “locks” at your original starting balance. From that point, it no longer moves up, allowing you to freely compound profits.
Example:
If you start with $100,000, your max drawdown is $94,000.
Reach $104,000 closed balance → new drawdown is $98,000.
Reach $106,000 closed balance → drawdown locks at $100,000.