Drawdown
The maximum total loss your account can take before it's closed — the single most important number in your prop firm's rulebook.
Drawdown is the total loss budget for the life of your account. Where the daily loss limit caps a single day, the maximum drawdown caps the whole thing: fall below the floor it defines and the account is done.
Everything in prop trading is downstream of this number. Understand it precisely and you’ll never be surprised by an account closure — which puts you ahead of most traders, because nearly all evaluation failures come from breaching a loss rule, not from failing to make money.
There are two families, and the difference is enormous:
Static drawdown — the floor is fixed from the start and never moves. A $50,000 account with a $2,000 static drawdown has a floor at $48,000, forever. Make $5,000 and your floor is still $48,000, meaning you now have $7,000 of room.
Trailing drawdown — the floor rises with your peak balance (high-water mark) and never falls back. That same $50,000 account with a $2,000 trailing drawdown starts at $48,000, but after you reach $55,000 the floor has trailed up to $53,000.
Watch the two diverge on the same equity curve:
| Account balance | Static floor ($2,000) | Trailing floor ($2,000) | Room under static | Room under trailing |
|---|---|---|---|---|
| $50,000 (start) | $48,000 | $48,000 | $2,000 | $2,000 |
| $53,000 | $48,000 | $51,000 | $5,000 | $2,000 |
| $55,000 (peak) | $48,000 | $53,000 | $7,000 | $2,000 |
| $53,500 (giveback) | $48,000 | $53,000 | $5,500 | $500 |
At $53,500 the static trader is comfortable. The trailing trader is $500 from the floor — while up $3,500 on the year. Same trades, completely different risk picture.
Trailing further splits into end-of-day and intraday variants. Read Trailing Drawdown Explained, then check which type your firm uses in our directory — before you buy.