Understanding Maximum Drawdown in Prop Firms
Maximum drawdown (often called the Max Loss Limit) is the overall loss threshold set by prop firms to cap their downside on funded accounts. It defines the point at which your account is closed and your challenge is failed.
Static vs. Trailing Drawdown
Firms implement maximum loss limits in two different ways:
- Static Max Loss (e.g. FTMO): The limit is fixed relative to your starting account size. For a $100k account with a 10% limit, your account floor is always $90,000, regardless of how high your balance grows.
- Trailing Max Loss (e.g. Apex): The limit trails your highest achieved balance or equity peak. For a $100k account with a $3,000 trailing limit, if your account grows to $105,000, your loss floor trails up to $102,000. It never moves back down.