Drawdown
The maximum loss allowed on a prop-firm account before failure. The most important rule to understand before buying an evaluation.
Drawdown sets how far your balance can fall. It can be static (fixed, from the starting balance), end-of-day (EOD) or trailing (it 'follows' your equity high). The drawdown type completely changes risk management.
In depth
The drawdown (or maximum allowed loss) is the core rule of every prop firm: the amount your account can lose before it's closed. It's the funder's safeguard: while you stay above it you trade; if you hit it, the evaluation or funded account ends. Understanding exactly how it's calculated matters more than the profit target.
Several variants exist: static drawdown (a fixed threshold, based on the starting balance), end-of-day drawdown (EOD, locked on the closing balance) and trailing drawdown (which follows your gains, including unrealized ones). Two accounts advertising a '$2,000 drawdown' can be radically different depending on the method: that detail is what keeps a funded trader alive or not.
In practice, before choosing a prop firm, identify the exact drawdown type and its basis (balance or equity, intraday or EOD). An EOD drawdown is far more comfortable than an intraday trailing one: it doesn't tighten while you're in a position. Our comparator shows this criterion for each firm.
A $2,000 trailing drawdown: go to +$1,000 and your buffer resets to -$1,000 below the new high.
Looking only at the drawdown amount without looking at its mechanics. A 'large' intraday trailing drawdown can be more dangerous than a small EOD one. The number means nothing without the calculation method.
Frequently asked
Static or trailing drawdown, which is harder?
Trailing is generally tougher: it follows your gains and raises the threshold, shrinking your buffer after each new high. Static stays fixed on the starting balance, so it's more predictable.
Is the drawdown based on balance or equity?
It depends on the firm. On equity (intraday), it accounts for open positions and can trigger during the session; on balance (EOD), it only locks at the close. Check before committing.
What happens if I hit the drawdown?
In an evaluation, it's failed and you must restart (often via a paid reset). On a funded account, the account is usually closed. It's the red line never to cross.
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