How much does drawdown cost you in a trading tournament? 6 scored sessions

Return % = (finish − start) ÷ start × 100. You start with $10,000, the same as every trader in the lobby.

Score = return % − penalty. The penalty is the part of your max drawdown above 10%, charged at 1.5×. When your max drawdown is at or under 10%, the penalty is zero and your score equals your return.

• ◆Your high mark is your highest banked balance. That is your starting capital plus profit from trades you have closed. Profit on a trade that is still open does not raise it.
• ◆Your drop is how far your account value falls below that mark. Open trades count here. The largest drop of the session is kept, even if you recover every dollar.

Max drawdown % = largest drop ÷ highest banked balance at the bell.

Two things follow. Giving back profit on an open trade costs you nothing, because that profit never raised your high mark. An open trade that goes underwater counts from the moment it does, closed or not.

Session 1: +6% with a 3.77% drawdown

You dip $400 and finish on $10,600. The drawdown sits well under 10%, so nothing is charged. Score: +6.

Session 2: +9% with a drawdown of exactly 10%

You drop $1,090 against a high mark of $10,900. That is 10% on the nose. The charge starts above the line, so you keep the full return. Score: +9.

Session 3: +12% with a 14% drawdown

You are 4 points over the line. At 1.5× that costs 6 points. Score: +6, the same as session 1, on double the return.

Session 4: +18% with a 24% drawdown

The biggest profit of the six. You are 14 points over the line, which costs 21 points. Score: −3. You made money and finished below zero.

Session 5: −3% with a 6% drawdown

A losing session with a shallow drop. No charge. Score: −3, level with session 4.

Session 6: +1% after giving back an open winner

A trade runs well into profit, comes most of the way back, and you close it for a small gain. Your account value never fell below your banked balance, so your drawdown is 0%. Score: +1.

The lower max drawdown wins. If that is level too, the earlier registration wins.

So session 1 ranks above session 3: both scored +6, and session 1 dropped 3.77% against 14%. Session 5 ranks above session 4 for the same reason. The trader who finished −3% ranks ahead of the trader who made the most money.

Know your line before the bell. On $10,000 with nothing banked yet, 10% is a drop of $1,000. Size your trades and set your stops so that one bad run cannot take you past it. Once you bank profit your high mark rises, and the room below it is measured from there.

The full rules, including the position lock, are in how tournament scoring works. For the sum that sizes a trade so one bad run stays inside the line, read how much to risk per trade.