Drawdown Rules Explained

Drawdown is one of the most important prop firm rules. It defines how much room the account has before it fails, and the exact calculation method can completely change the difficulty of a challenge.

Last reviewed: 25 May 2026. Drawdown rules vary heavily by firm and account type. Always check whether the rule is static, trailing, end-of-day, intraday, balance-based or equity-based.

Common drawdown types

Type	How it usually works	Main trap
Static drawdown	The loss limit stays fixed from the starting balance or a fixed threshold.	Can still be tight, but it is easier to plan because the line does not move.
Trailing drawdown	The loss limit moves up as the account reaches new profit highs.	Open profit can move the line, leaving less room after reversals.
End-of-day trailing	The line trails based on end-of-day balance rather than intraday highs.	More forgiving than intraday trailing, but still changes after profitable days.
Intraday equity trailing	The line can move based on unrealised open equity during the session.	A winning trade that reverses can create a fail even if the account looked safe.

What to verify

• Does drawdown trail balance or equity?
• Does it move intraday or only at end of day?
• Does it stop trailing after a threshold?
• How close is the limit to normal daily strategy variance?
• What happens after first payout or scaling?