Crypto volatility and a drawdown that counts open profit
On a perp desk, a pump that fully reverts is noise. Here it moves your floor for good. A worked example with eight Bitcoin positions that never closed and still breached.
Crypto traders are used to violence in the chart. A 5 percent candle that is fully retraced by the evening is a normal Tuesday, and on most venues it costs you nothing if you sized sensibly and held.
Inside an evaluation it can cost you the account. Not because of leverage — there is none — but because of how the maximum drawdown is measured.
The rule, in one paragraph
Every account limit is equity-based: the live value of everything you hold counts, continuously. The maximum drawdown is 6 percent of account size, measured down from your equity high-water mark, and that mark follows every new peak upward and never locks. A peak made by positions you have not closed is still a peak. When it moves, the floor moves with it, permanently.
The rulebook and every rule in one place both describe this. What follows is why crypto is the category where it bites hardest.
A worked example
A 50,000 account. Maximum drawdown is $3,000, so the starting floor is 47,000. The trader opens eight Bitcoin markets — different dates, different levels, eight separate events — all on the same side, each bought at 50 cents and sized to the $250 per-event ceiling.
| Step | Equity | Floor |
|---|---|---|
| Open. $2,000 in, $20 commission | 49,980 | 47,000 |
| Pump. All eight mark at 80 cents | 51,180 | 48,180 |
| Reversal. The move retraces, then keeps going | falling | 48,180 |
| Resolution. All eight resolve against it | 47,980 | 48,180 |
Final equity sits $200 below the floor. The account breaches.
Now run it again without the rally in the middle. Same entries, same eight losses, same 47,980. Against the original floor of 47,000 that is a bad week with $980 of room to spare.
The only difference between surviving and breaching was a profit the trader never took. The pump raised the floor by $1,180, the reversal gave it all back, and the rule kept the higher floor.
Why crypto specifically
It moves together. Eight Bitcoin markets on eight dates are eight events to the per-event cap and close to one position to your equity. A move that marks one of them up marks all of them up, and the high-water mark registers the sum. Ether, Solana and most of the large caps tend to follow, so spreading across coins diversifies less than it appears to. Twenty events is not twenty risks goes deeper on this.
It mean-reverts sharply. Squeezes and liquidation cascades on the leveraged venues produce exactly the shape that hurts here: a fast spike, then a full retrace. Your positions are not liquidated, but their marks follow the underlying all the way up and all the way back.
It never closes. Polymarket trades around the clock and your equity is marked around the clock. The daily limit — 3 percent, reset at 5PM ET — and the trailing floor do not pause for the weekend.
What actually helps
None of this is a recommendation to trade or not trade any market. These are the mechanics that decide what a given choice does to your account.
Count correlated positions as one. Before opening, add up the open exposure that turns on the same underlying. If Bitcoin moving 5 percent changes the mark on all of it, that is one risk, and it should be sized like one.
Size for the round trip, not the entry. Ask what happens to your floor if everything you hold runs up and then comes all the way back. If the answer is a breach, the position is too large for this rule even if it is fine for the per-event cap.
Closing is free, and it ends the give-back. There is no commission on close. Taking a position off at a high mark does not lower the high-water mark, but it does stop that position handing the gain back underneath it. Whether to close is your call. Knowing that it costs nothing is part of making it.
Remember the ceiling cuts both ways. Profit per event is capped at half a percent of account size, so the most a position can add is fixed. What it can move in the meantime is not. Oversizing a capped crypto position buys more mark-to-market swing — which here means more high-water-mark risk — and no extra profit at all.
The short version
On an exchange, volatility you sit through is free if you survive it. In this evaluation, open profit is real profit to the rules, and giving it back is a real loss. Crypto produces more open profit that gets given back than almost any other category, which is why it is worth understanding this rule before the first trade rather than after the first breach.
Your Call evaluations trade Polymarket. Evaluations are conducted on simulated accounts. Not financial advice.