Trading Rules
Prop Firm Drawdown Explained
Drawdown rules end more evaluations than profit targets do. This article explains the three drawdown types you will encounter and how each one behaves in a live trading session.
Published February 6, 2026 · 6 min read
Daily drawdown
A daily loss limit caps how much the account may fall within one trading day. It is usually measured from the day's opening balance or opening equity, and many providers include floating losses on open positions.
Maximum drawdown
Maximum drawdown is the absolute floor for the account. Once equity touches it, the account is typically closed permanently rather than paused.
Trailing drawdown
A trailing limit rises as the account makes new highs. This is the mechanic that surprises most traders: after a strong day, the distance between your equity and your loss limit can be much smaller than at the start.
Practical position sizing
Size positions against the daily limit rather than the account balance. If your daily limit allows a small loss, a normal stop-loss on an oversized position can breach it in a single trade.