The "Drawdown Blocker" feature in prop trading firms is a risk management tool designed to prevent excessive losses. It operates by tracking account drawdowns, monitoring daily trader drawdowns, preventing overtrading, and providing alerts for high-risk trades. When the drawdown reaches a predefined level, it automatically shuts down trading activities, including closing all open positions and orders. This threshold is typically set based on the firm's risk management policies or the trader's risk tolerance. The primary benefit of this feature is the protection of capital as it prevents traders from jeopardizing their trading account or the firm's capital. By imposing a limit on the maximum allowable drawdown, it helps maintain a balance between pursuing profitable opportunities and mitigating risk. Additionally, the Drawdown Blocker encourages disciplined trading by preventing the common pitfall of chasing losses or trading impulsively in volatile market conditions. The following is a compilation of proprietary firms that include a Drawdown Blocker feature in their offerings:
