Definition:
The maximum drawdown is the largest accumulated loss a trader can take in their PEI account before the account is invalidated. In this program, the drawdown is dynamic and set at 8% of the initial account balance.

This means the account balance can never fall below that protection level, and the limit will adjust upwards as the trader generates profits.

Explanation (Dynamic Drawdown – Static Above Threshold):

• The allowed loss level starts at –8% of the initial balance.

• As the trader makes profits, the drawdown level also moves up dynamically, following the growth of the account.

• Once a certain threshold is reached, the drawdown freezes at that level and does not continue to increase.

• This system protects accumulated gains, prevents the drawdown from rising indefinitely, and provides the trader with a safety cushion to scale with confidence.

Example 1 (basic case):

• Initial balance: $10,000

• Maximum drawdown: 8% = $800

• Initial protection level: $9,200

If the trader grows the account to $11,000, the dynamic drawdown also moves up and adjusts to $10,200.
From that point on, $10,200 becomes the fixed protection level, and it will not move higher even if the trader continues to increase the balance.

👉 This means that, no matter what happens afterward, the account can never drop below $10,200.

Example 2 (reduction case):

• Initial balance: $25,000

• Maximum drawdown: 8% = $2,000

• Initial protection level: $23,000

The trader grows the account to $28,000. At this point, the dynamic drawdown adjusts upward to $26,000.
Now, suppose the trader hits a losing streak and the balance falls to $26,500.
In this case, the drawdown has already frozen at $26,000.

👉 This means the trader has a $500 buffer to keep trading, but the account can never fall below $26,000.

In summary:
The dynamic drawdown in the PEI:

• Protects the trader at the start, as it follows the account growth.

• Freezes at a fixed level once the threshold is reached, ensuring the trader doesn’t lose all accumulated gains.

• Provides stability and clarity, since the trader knows exactly how far losses can go before the account is invalidated.