Maximum Loss Limit (MLL) — your account-ending floor

Why this lesson exists

The Maximum Loss Limit is the single rule that ends an xtree account. Hit it and the account is terminated — every open position auto-flattened, the evaluation over. Nothing else on the platform does this. Not a bad day, not a string of losing trades, not even a DLL breach. Only MLL.

If you remember one number from this entire module, remember the MLL floor of your account at any given moment. It is the line under your equity that you are trading above. Everything in this lesson — the cushion, the Day-1 carve-out, the trailing logic, the lock, the recovery math — is here so that you can answer one question on any trading day: how much room do I have right now?

This is also the most-bookmarked lesson on the platform for a reason. Read it twice.

The cushion and the floor

On the Standard tier, the MLL cushion is ₹15,000 — 3% of the ₹5,00,000 starting balance. The MLL floor is the highest equity you have ever closed a trading day at, minus the cushion:

mll_floor = peak_equity − ₹15,000

peak_equity is the highest EOD (End-of-Day) Balance the account has ever closed at. Daily settlement on xtree happens at 05:30 IST (= 00:00 UTC) — at that moment, the trading day closes, your balance is crystallised, and that number is compared against the running peak.

This formula has two important properties:

1. The floor only ratchets up. A new peak raises the floor. A bad day cannot lower the floor; the peak is sticky.
2. The floor moves with you. As you make money, the threshold for termination rises with you, not in your favour. This is what "trailing drawdown" means.

The breach test is real-time and intraday — every tick, realised plus unrealised P&L are summed into your live equity. If live equity dips below mll_floor, the engine auto-flattens every open position and terminates the account.

Day 1 is different — the static carve-out

There is exactly one carve-out, and it covers your first day of trading.

Day 1 starts on the trading day (05:30 IST → 05:30 IST window) that contains your first executed trade. You can activate your account on Monday but not trade until Thursday — Day 1 doesn't start until Thursday's first fill. On Day 1, the MLL is static at:

day1_mll_floor = startingBalance − ₹15,000
              = ₹5,00,000 − ₹15,000
              = ₹4,85,000

Static means it does not trail intraday. You can drift from ₹5,00,000 down to ₹4,86,000 and back up to ₹5,10,000 across Day 1 without breaching, even though peak_equity − ₹15,000 would have moved the floor up. The Day-1 carve-out exists because every new trader's first session is the noisiest and the most likely to draw down before they find their feet — terminating accounts on a Day-1 wobble would be brutal and unhelpful.

The instant Day 1 closes at 05:30 IST, the rules switch. From Day 2 onward, the formula mll_floor = peak_equity − ₹15,000 is in force and trails up after every profitable EOD.

Walking through five days

Standard ₹5,00,000 account. The trader places their first trade on Day 1. Here is the floor across the first week:

| Day | EOD Balance | Peak (after EOD) | MLL Floor (intraday next day) | |---|---|---|---| | 1 | ₹4,92,000 | ₹5,00,000 (the start) | ₹4,85,000 (static, Day 1) | | 2 | ₹5,08,000 | ₹5,08,000 | ₹4,93,000 (= ₹5,08,000 − ₹15,000) | | 3 | ₹5,18,000 | ₹5,18,000 | ₹5,03,000 | | 4 | ₹5,14,000 | ₹5,18,000 | ₹5,03,000 (peak unchanged → floor unchanged) | | 5 | ₹5,25,000 | ₹5,25,000 | ₹5,10,000 |

Notice three things. First, Day 1 closed at a small loss (₹4,92,000) but never breached — the static floor at ₹4,85,000 gave room. Second, after Day 2's strong close at ₹5,08,000, the floor jumped from ₹4,85,000 to ₹4,93,000. The trader can no longer touch ₹4,85,000 without breaching. Third, on Day 4 the trader gave back some profits but the peak did not lower the floor — the ₹5,18,000 high-water mark from Day 3 stayed in force.

This is the trailing drawdown working as designed. The floor follows you up the staircase but does not follow you back down.

The MLL lock

There is a way to make the MLL permanently safe: hit the profit target.

The Standard tier profit target is ₹30,000 — that is, balance of ₹5,30,000. The moment your EOD Balance has ever been ≥ ₹5,30,000, the MLL locks at the starting balance:

locked_mll_floor = startingBalance = ₹5,00,000

It stays locked for the rest of the evaluation, regardless of what your equity does next. You can run up to ₹5,80,000, give back ₹50,000, and never breach. You cannot fall below the ₹5,00,000 you started with.

This is intentional. Once you have demonstrated the skill to reach the profit target, the platform stops trailing the drawdown against you. The risk being measured shifts from "can you avoid blowing up" to "can you operate consistently."

Why MLL exists at all

xtree's evaluation accounts are simulated — no real money is at risk inside the account. But the cleared-analyst payouts are real, and the working capital for those payouts sits in xtree Capital LLP. MLL is the downside cap on each evaluation seat: it bounds the maximum drawdown the platform takes responsibility for if a trader were eventually cleared.

The number — ₹15,000 — was chosen so that it is large enough to absorb normal-day variance on a 1%-risk strategy (three losing trades is ₹15,000, which would fail a Day-1 trader; but Day-1 carve-out covers exactly that case), and small enough that account-killing reckless trades hit it quickly. The 3% cushion is roughly two normal day's drawdowns plus one bad trade.

For the regulator-facing version: MLL is the platform's commitment that no trader can produce an unbounded liability inside an evaluation seat. For you, the trader: MLL is the rule that forces you to size for survival before strategy.

Drawdown-recovery math

The asymmetry that makes MLL so important is geometric, not linear. Losses and recoveries are not symmetric percentages.

Equity drops from ₹5,00,000 to ₹4,90,000 — a 2% drawdown.

recovery_needed = ₹10,000 / ₹4,90,000 = 2.04%

Almost symmetric. Now drop further:

| Drawdown | Equity left | Gain required to recover | |---|---|---| | 5% | ₹4,75,000 | 5.26% | | 10% | ₹4,50,000 | 11.11% | | 20% | ₹4,00,000 | 25.00% | | 50% | ₹2,50,000 | 100.00% | | 75% | ₹1,25,000 | 300.00% |

A 20% drawdown requires a 25% gain to recover. A 50% drawdown requires a 100% gain. This is why position sizing matters before strategy — see lesson 2.1 position sizing — and why the MLL cushion is small. The platform is not waiting for you to climb out of a 30% hole; the rule cuts the account before holes get that deep.

Worked example — drawdown into MLL

Standard ₹5L. The trader closed Day 3 at ₹5,18,000. Day 4 begins with MLL floor at ₹5,03,000 (₹5,18,000 − ₹15,000). They have ₹15,000 of cushion.

They put on a 10× xBTC long at ₹85,00,000 with 0.1 BTC notional ₹8,50,000. Margin ₹85,000. No stop. (This is the mistake; the lesson is in what happens next.)

BTC drops 1.5% to ₹83,72,500. Unrealised loss = 0.1 × ₹1,27,500 = ₹12,750. Live equity: ₹5,18,000 − ₹12,750 = ₹5,05,250. Still above floor. The trader holds, expecting a bounce.

BTC drops another 0.5% to ₹83,30,000. Unrealised = 0.1 × ₹1,70,000 = ₹17,000. Live equity ₹5,01,000. Breach. Floor was ₹5,03,000. The engine flattens the position at market. Realised loss ₹17,000. Final balance ₹5,01,000 — and account terminated, even though the balance is still above the original ₹5,00,000 starting point.

Two lessons. First, the MLL terminates on live equity ≤ floor, not on balance ≤ starting balance. The floor had trailed up; ₹5,01,000 was below floor even though it was still profitable in absolute terms. Second, a 2% adverse move on a 10× position with no stop was enough to terminate. Position sizing matters not just for normal losses but for tail scenarios.

The Free Reset

xtree gives one Free Reset per subscription month for accounts terminated by MLL breach. The reset:

• Returns the account to ₹5,00,000 starting balance
• Resets MLL state (including Day-1 carve-out — the next first-trade day becomes the new Day 1)
• Resets day counter, consistency state, DLL counter
• Does not pause or restart the subscription billing

It is exactly one per subscription month, per account. Burn the reset and the next MLL breach ends the evaluation. The Free Reset is not available for accounts terminated by fraud-classified violations or for Cleared Analyst Phase failures.

The reset exists because Day-1-style noise can stomp newer traders despite the carve-out, and a single bad week shouldn't push someone off the platform forever. It is not a get-out-of-jail card for reckless trading — the math of subscription cost vs. one reset per month is unforgiving if you repeatedly breach.

Common misunderstanding

"I'm still above my starting balance, so MLL can't apply to me."

Wrong, and it's the most expensive misunderstanding on the platform. MLL trails against your peak, not against your starting balance. A trader who runs the account up to ₹5,20,000 and then draws back down to ₹5,04,500 has breached the MLL floor of ₹5,05,000 — even though they are still ₹4,500 in profit against the original ₹5,00,000.

The floor that matters is not "₹5,00,000 minus the cushion." It is "highest EOD I have ever closed at, minus the cushion." Always know your peak. Most trading dashboards on xtree display the current floor explicitly — look at it before you click buy.

The only time the floor stops trailing is after MLL lock (balance ≥ ₹5,30,000 at any EOD), at which point it permanently sits at ₹5,00,000. Until then, every profitable EOD raises the bar.

Recap

• MLL is the only rule that terminates an xtree account. Breach is real-time, intraday, realised + unrealised.
• Floor formula: peak_equity − ₹15,000. Trails up, never down.
• Day 1 is static at ₹4,85,000 — only the day containing your first fill.
• Lock condition: any EOD Balance ≥ ₹5,30,000 permanently locks the floor at ₹5,00,000.
• Drawdown recovery is geometrically harder than the drawdown itself. 20% down = 25% up.
• One Free Reset per subscription month for MLL-terminated accounts. Don't rely on it.

Next up: the protective day-stop that survives the day instead of killing the account — the Daily Loss Limit.

Test yourself

Next lesson: Daily Loss Limit (DLL) explained — the protective day-stop that locks the day instead of killing the account.