Static drawdown
Also known as: static max drawdown, fixed drawdown
Static drawdown: Static drawdown is a maximum loss limit fixed at a set level below an account's initial balance; unlike trailing drawdown, it does not rise when the account makes money.
How does static drawdown work?
The floor is set once, usually as a percentage below the initial balance, and stays there for the life of the challenge or funded account. Profits increase the distance between the account and the floor; losses reduce it. If equity or balance, depending on the firm’s rule, falls below the floor, the account is closed: prop firm drawdown rules.
Static vs trailing drawdown
A trailing drawdown rises with the account’s high, so the room to the floor never exceeds the drawdown allowance. A static drawdown leaves more room after profits, because the floor stays where it started.
Worked example
Illustrative only: a $100,000 account with a 10% static drawdown must stay above $90,000. After gains to $108,000 the floor is still $90,000, so the account can fall $18,000 before breaching it. Under a 10% trailing drawdown, the floor would have risen to $98,000.
Sources
- Trading Objectives, FTMO
Learn more
- Prop Firm Drawdown Rules: Static vs Trailing Drawdown Explained
Prop firm drawdown rules explained: daily drawdown, maximum drawdown, static vs trailing and end-of-day trailing, balance vs equity, with worked examples.
- What Is a Prop Firm? How Prop Trading Firms Work
What a prop firm is and how prop trading firms work: challenge fees, prop firm evaluations, funded and simulated accounts, profit splits, rules and risks.
Related terms
- Trailing drawdown
Trailing drawdown is a maximum loss limit that rises as an account reaches new highs, staying a fixed distance below the highest balance or equity reached, and never falls.
- Daily drawdown
Daily drawdown, also called the daily loss limit, is the most an account may lose within one trading day under a prop firm's rules; the limit is recalculated at a reset time set by the firm.
- Drawdown
A drawdown is the decline in an account's value from a peak to a subsequent low, usually expressed as a percentage of the peak.