Daily drawdown vs maximum drawdown
Daily drawdown is the percentage your account falls from the highest balance recorded that day (or, on FTMO Challenges, from the previous day's closing balance). It resets at midnight server time. Maximum (overall) drawdown is the percentage your account has fallen from its highest-ever balance across the entire challenge or funded period. It does not reset.
How prop firms enforce drawdown
Most prop firms run drawdown checks on every tick — that is, on the floating equity, not just on closed-trade balance. This means an open trade running deep in the red can breach drawdown even if it eventually recovers. Some firms use closed-trade drawdown only. Always verify which type your firm uses before placing a trade with a wide stop.
Static vs trailing maximum drawdown
Static max drawdown is anchored to the original starting balance. Trailing max drawdown follows the account's high-water mark — as profits grow, the drawdown floor moves up with them. Trailing drawdown is more punishing because it ratchets the floor upward and never lets it back down. Most challenges use static drawdown; many funded accounts use trailing.
How to avoid drawdown breaches
Lock per-trade risk at 0.5–1% via the position-sizing formula. Set a daily-loss-cap at half of the firm's allowed daily drawdown — if FTMO allows 5%, your self-imposed cap is 2.5%. The cap exists so willpower never has to be the final barrier between you and a breach.
Related terms
Author
Maximilian Bossow
Independent prop-firm trader. Reached FTMO Platinum tier with verifiable Overall Rewards across multiple funded accounts. Founder of MB Capitals — a coaching system for traders who want to pass prop-firm challenges through structured risk management, not gurus. The proof is on the homepage: every cert, every payout, every receipt of what it took to get there.