Prop Firm Drawdown Rules: Static vs Trailing Drawdown Explained

At a glance

Daily drawdown

Most the account may lose in a day

Maximum drawdown

Static or trailing

Measured on

Balance or equity, by firm

Floating losses

Count on equity-based limits

What is prop firm drawdown?

Prop firm drawdown is the loss an account may take before it breaks the firm’s rules. In general, drawdown is the fall from an account’s peak; prop firm drawdown rules turn it into hard limits, and an account that falls below a limit is closed. Most prop firm challenge rules include two:

• Prop firm daily drawdown: the most the account may lose within one trading day: daily drawdown.
• Prop firm maximum drawdown: the most the account may lose in total, measured from a fixed level (static drawdown) or from the account’s high (trailing drawdown).

The key difference is that static drawdown stays fixed, while trailing drawdown rises as the account reaches new highs. The limits are usually a percentage of the initial account size and vary by firm and programme: what is a prop firm.

How is prop firm daily drawdown calculated?

The daily drawdown floor is recalculated at a fixed prop firm daily reset time, set by the firm:

daily drawdown floor = balance (or equity) at the daily reset − daily loss allowance

Whether the firm uses balance or equity at the reset, and whether the floor is checked against balance or equity during the day, depends on its rules. At many firms the check is against equity, so a large open loss can breach the limit even if no trade has been closed.

Prop firm daily drawdown example: $100,000 account (illustrative only)

Assumptions: $100,000 initial account, daily loss allowance of 5% of the initial account ($5,000), floor calculated from the balance at the daily reset and checked against equity.

• Day 1: balance at reset $100,000, so equity must stay above $95,000.
• Day 2: balance at reset $102,000 after a winning day, so equity must stay above $97,000.
• If an open trade on day 2 shows a floating loss of $5,500 and no other trades are open, equity falls to $96,500 and the daily limit is breached before the trade is closed.

What is static drawdown?

Static drawdown is a maximum loss limit fixed at a set level below the initial balance that does not move when the account makes money. On a $100,000 account with a 10% static maximum drawdown, the account must stay above $90,000 for the life of the challenge; after a $6,000 gain, the distance to max drawdown is $16,000: static drawdown.

What is trailing drawdown?

Trailing drawdown is a maximum loss limit that rises as the account reaches new highs, staying a fixed distance below the highest balance or equity reached, and never falls. Some firms stop the trailing floor once it reaches the initial balance, so it cannot rise above the starting capital: trailing drawdown.

End-of-day trailing drawdown

An end-of-day trailing drawdown updates once a day, from the highest closing balance at the daily reset. Profits made and given back within the same day do not raise the floor.

Intraday trailing drawdown

An intraday trailing drawdown can move with every new equity high during the day, including unrealised profit and loss on open trades. A trade that shows a large open profit and then reverses can raise the floor before it is closed.

The static vs trailing drawdown example below shows how the two floors move on the same account.

Static vs end-of-day trailing drawdown on a $100,000 account (illustrative only)

Assumptions: $100,000 initial account, maximum drawdown of 10% ($10,000), trailing floor updated from the closing balance each day.

Day	Closing balance	Static floor	Trailing floor
Start	$100,000	$90,000	$90,000
1	$104,000	$90,000	$94,000
2	$103,000	$90,000	$94,000
3	$106,000	$90,000	$96,000

After day 3, the room to the floor is $16,000 under the static rule but $10,000 under the trailing rule.

Static vs trailing drawdown: which is easier?

Static drawdown generally leaves more room after profits because the floor does not rise. Trailing drawdown raises the floor with the account’s gains, so less of those gains can be given back. Which is easier to trade under depends on the firm’s other rules and on the strategy, for example how far trades swing before they close.

	Static drawdown	Trailing drawdown
Floor after profits	Stays where it started	Rises with the account’s high
Room after a winning run	Grows	Stays at most the drawdown allowance
Effect of a large open profit	None	Intraday versions can raise the floor before the profit is closed
Main risk	The same total room, whatever the gains	Giving back recent profits can breach the limit

Balance-based vs equity-based prop firm drawdown

Balance-based drawdown counts only closed trades. Equity-based drawdown also counts floating P&L, the unrealised profit and loss on open trades, plus swaps and commissions, so open trade drawdown can breach a limit while the trade is still running. A firm’s rules page states which it uses: equity drawdown.

Prop firm drawdown rules comparison: FTMO vs FundedNext

As of October 2026, from the firms’ own rules pages. Rules change, so check the current terms before buying a challenge.

Firm and programme	Daily drawdown	Maximum drawdown	Static or trailing	Measured against	Daily reset time
FTMO Challenge 2-Step	5% of initial capital	10% of initial capital	Static	Equity	Midnight CE(S)T
FTMO Challenge 1-Step	3% of initial capital	10% of initial capital	End-of-day trailing (can rise, never falls)	Equity	Midnight CE(S)T
FundedNext Stellar 2-Step	5% of initial balance	10% of initial balance	Static (account must stay above 90% of the initial balance)	Balance or equity	Not stated on the programme page

How to manage risk with prop firm drawdown limits

• Size positions from the remaining drawdown. The distance to max drawdown and to the daily floor sets how much a trade can lose; if $3,000 of daily loss buffer remains, a trade risking $1,000 uses a third of it: position sizing.
• Keep a drawdown buffer. Spread, slippage and swaps count against equity-based limits, so a stop placed exactly at a limit can still breach it.
• Count open trades together. Several open positions in correlated pairs can reach the daily floor at the same time.
• Use a consistent risk-per-trade framework that leaves sufficient room before the daily and maximum drawdown limits for a run of losing trades: 1% rule.

Use the prop firm drawdown calculator to calculate the remaining daily drawdown, maximum drawdown and trailing drawdown room from the current balance and equity.