Vanguard - Trading Rules and Drawdown
Learn how risk per trade and drawdown rules work together.
Max Risk Rule
Feature | Details |
Limit | 2% |
Basis | Initial account balance |
Calculation | Balance minus equity |
Applies To | Total exposure across all open trades |
How It Works
The max risk rule is not calculated per individual trade. Instead, it measures your total floating risk at any given time.
The rule checks the difference between:
Your account balance
Your current equity
If that difference exceeds 2% of the initial account balance, it is a breach.
Key Principle
This rule applies:
Across all open trades combined
Regardless of the number of positions
Regardless of the symbol being traded
Example 1 – Single Trade
Account size: 100,000
Max allowed risk: 2,000
You open a trade and your floating loss reaches:
Equity = 98,000
Balance = 100,000
Difference = 2,000 → Within limit
If equity drops to 97,900:
Difference = 2,100 → Breach
Example 2 – Multiple Trades
You have 3 open trades:
Trade 1: -800
Trade 2: -700
Trade 3: -600
Total floating loss = 2,100
Balance = 100,000
Equity = 97,900
Difference = 2,100 → Breach
Even though no single trade exceeded 2%, the combined exposure caused the breach.
Example 3 – Profit Then Exposure
Account grows to 103,000
Balance = 103,000
You open trades and floating loss becomes 2,100
Rule is still based on initial balance (100,000):
Max allowed = 2,000
Even though you are in profit overall:
This is still a breach
Daily Drawdown
Feature | Details |
Limit | 3% |
Based On | Higher of balance or equity |
Reset Time | 5 PM EST |
Example
Start of day:
Balance: 100,000
Equity: 101,000
Daily limit:
101,000 - 3,000 = 98,000
Falling below 98,000 results in a breach.
Trailing Drawdown
Feature | Details |
Limit | 5% |
Basis | Initial balance |
Behavior | Moves upward with equity |
Lock Condition | Locks at initial balance after +5% |
Example
Starting balance: 100,000
Drawdown: 95,000
Account grows to 103,000
Drawdown moves to 98,000
At 105,000:
Drawdown locks at 100,000
Trading Restrictions
Rule | Description |
EA Trading | Allowed only with add-on |
News Trading | Allowed only with add-on |
Weekend Trading | Allowed only with add-on |
Martingale | Not allowed |
Hedging | Not allowed |
HFT | Not allowed |
Copy Trading | Allowed within same trader accounts |
Key Notes
Risk per trade is strictly enforced
Floating losses count toward drawdown
Trailing drawdown behaves similarly to evaluation models
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