PROP FIRM RULES
A static drawdown is measured from your starting balance and never moves. A trailing drawdown follows your account's highest point, so every new peak raises the level that ends your account. Most traders are breached because they size against the account balance instead of the distance left to that limit.
By the Finotaur Team · Last updated: 27 July 2026
THE THREE MODELS
Almost every futures prop firm uses one of three drawdown models. The words on the dashboard often look similar, so traders assume the mechanics are similar too. They are not, and the difference decides how much room you actually have on any given day.
The number that matters is never your balance. It is the distance between your current equity and the level that closes your account. Two traders with the same balance can have completely different amounts of room depending on which model they are on and where their peak sat.
| Model | Measured from | What happens when you profit | Practical effect |
|---|---|---|---|
| Static (fixed) | Your starting balance | Nothing. The limit stays where it started. | Room grows as you profit. The most forgiving model. |
| Intraday trailing | Your highest equity, including unrealised profit | The limit rises with every new peak, even one you never closed. | An open trade that goes your way and comes back can tighten your limit without you booking a cent. |
| End-of-day trailing | Your highest closing balance | The limit rises only after a session closes at a new high. | Intraday spikes do not punish you, but locked-in profits permanently raise the floor. |
Intraday trailing is the model that surprises people. If your account spikes $1,200 in unrealised profit and you give it back, an intraday-trailing limit may have already moved up by that $1,200 — you are now closer to breach than before you took the trade, having made nothing.
THE ARITHMETIC
Consider a $50,000 evaluation with a $2,000 trailing drawdown. The trader thinks of it as a $50,000 account and sizes accordingly. In reality the account ends after $2,000 of decline from the peak, so the tradeable capital is $2,000, not $50,000. Sizing against the wrong number by a factor of 25 is what produces a breach in a single bad session.
Two ES contracts moving 20 points against you is $2,000 — the entire drawdown, in one trade, on a position most traders would consider modest for a $50,000 account. It is not modest for $2,000 of room.
The correction is mechanical. Decide what fraction of remaining room a single loss may consume, size the position so that a stop-out costs exactly that, and recompute it whenever the room changes. Most traders who pass do so because they made this one change, not because they found a better setup.
Take the distance between current equity and the drawdown level. That is your capital for sizing purposes. The account's face value is not.
On a trailing model the number moves. A sizing decision that was correct on Monday can be materially oversized by Thursday if your peak rose and you did not re-check.
A common approach is to keep one loss under a small fraction of remaining room so that a normal losing streak cannot reach the limit. The exact fraction is a personal risk decision, but it should be a decision, not an accident.
THE SECOND LIMIT
Most firms run a daily loss limit alongside the drawdown. They are independent: the drawdown ends the account, the daily limit ends the session. Breaching the daily limit usually locks you out until the next session rather than closing the account, though firms differ and some treat repeated breaches as a termination event.
The practical consequence is that a trader can be nowhere near the account drawdown and still lose the day. Traders who track only one of the two get surprised by the other.
Firms also differ on whether the daily limit is calculated from the previous close or from the day's peak equity. Read which one applies to you, because the two produce very different lockout points on a day where you were up early and gave it back.
WHAT TO CHECK
Drawdown mechanics are set by each firm and revised without much notice. Third-party comparison articles, including ones that look current, are frequently describing a version of the rules that no longer applies. Treat any external summary as a starting point and confirm against your own dashboard and agreement.
The four things worth confirming in writing before you place a trade: which drawdown model applies, whether it is calculated on realised or unrealised equity, whether the limit stops trailing once you reach a certain profit, and how the daily loss limit is measured.
A number of firms stop the trailing drawdown once the account reaches a set profit above the starting balance, converting it into a static limit from that point. If yours does, the point at which that happens is one of the most useful numbers on your dashboard, because your risk budget changes permanently when you cross it.
STEP BY STEP
Find in your agreement whether the drawdown is static, intraday trailing, or end-of-day trailing, and whether it is measured on realised balance or on equity including open positions.
Compute the actual equity value at which the account closes. This is a single number in dollars, not a percentage, and it is the only number sizing should reference.
The difference is your remaining room. This is your working capital for risk purposes, regardless of the account's face value.
Choose the fraction deliberately and write it down. It determines how many consecutive losses the account can absorb before it is gone.
Divide your permitted loss by the per-contract risk of the trade, which is your stop distance in ticks multiplied by the tick value. Round down, never up.
On a trailing model, a new high changes the limit. Re-derive remaining room at the start of each session and after any significant new peak.
FAQ
A static drawdown is measured from the account's starting balance and never moves, so profits increase the room you have. A trailing drawdown is measured from the account's highest point, so each new peak raises the level that ends the account. On a trailing model, being in profit does not necessarily mean having more room.
It depends on the model. An intraday trailing drawdown follows peak equity including open positions, so unrealised profit can raise the limit even if you never close the trade. An end-of-day trailing drawdown only moves when a session closes at a new high, so intraday spikes do not affect it.
This is the common signature of an intraday trailing drawdown. The account reached a new equity peak during an open trade, the limit trailed up to match, and the subsequent decline crossed the raised limit even though the balance was still above the starting figure. The limit had moved; the balance had not caught up.
No. They are separate rules that run at the same time. The drawdown limit ends the account. The daily loss limit typically ends the session and locks you out until the next trading day. You can breach one without being close to the other.
That is a personal risk decision and no external source should set it for you, but the input should be remaining room to the drawdown limit rather than the account's face value. The question worth answering is how many consecutive losses your account can survive at your chosen size, because that number determines whether a normal losing streak ends the account.
No, and the differences are material. Firms vary on the model, on whether it is calculated on realised or unrealised equity, on whether trailing stops after a certain profit, and on how the daily limit is measured. Rules also change over time. Confirm against your own agreement rather than a comparison article.