Drawdown in trading
Drawdown is the fall in an account's value from a peak to a later low, in dollars or as a percentage of the peak. In prop trading it is also the name of the loss limits that end challenges.
Drawdown = (peak − low) ÷ peak. An account that grows to $110,000 and falls to $99,000 has an $11,000, or 10%, drawdown. Prop firms cap it twice: a daily drawdown per day and a max drawdown in total.
Drawdown types prop firms use
| Type | What it limits | Typical setting |
|---|---|---|
| Daily drawdown | Loss within one day | 4–5% |
| Static max drawdown | Total loss from the start | 8–10% |
| Trailing drawdown | Loss from your highest equity | Futures firms, often a dollar amount |
| End-of-day drawdown | Trails the daily close only | Some futures and forex programs |
Daily drawdown calculator
Tap your account, your firm's daily limit and how today is going. It shows where your floor is and how many full stops you can still take.
Account size
Daily loss limit
Today so far
Risk per trade
Why drawdown is asymmetric
A 10% drawdown needs an 11.1% gain to recover; a 20% drawdown needs 25%; a 50% drawdown needs 100%. That is why prop firms cap it low and why small, fixed risk per trade matters more than any entry.
All the rules side by side: prop firm drawdown rules explained.
FAQ
What is drawdown in trading?
The decline of an account from a peak to a later low, measured in money or as a percentage of the peak.
How do you calculate drawdown?
(Peak − low) ÷ peak × 100. From $110,000 down to $99,000 is an $11,000, 10% drawdown.
What is a good max drawdown?
For prop accounts, staying well inside the firm's limit; many traders aim to keep any drawdown under half the allowed amount.