Alongside the daily loss limit, every prop account has an overall floor: the lowest your account may fall, at any time, before it is closed. Firms call it the maximum loss, maximum drawdown or overall loss limit. Where the daily limit protects the firm from one bad day, this one protects it from a slow slide.

Static: a fixed floor

A static maximum loss is set once, from the starting account, and never moves. FTMO’s 2-Step Challenge works this way: the Maximum Loss is 10 per cent of the starting account, so on $100,000 the floor is $90,000 for the life of the account. Make $6,000 and your room to the floor is now $16,000. A static floor gets more forgiving as you make money.

Watch this on video

Maximum Drawdown, Explained, in 3:10

A static floor never moves; a trailing floor only rises. Know which one you have, and size to the distance left.

Chapters

Trailing: a floor that follows you up

A trailing maximum loss rises as your account makes new highs. FTMO’s 1-Step Challenge uses an end-of-day version: the floor is 10 per cent of the starting account below the highest balance recorded at midnight (00:00 CE(S)T) on any earlier day, and it can only rise, never fall. Because it trails the end-of-day balance, a trade that is briefly in profit during the day does not move it.

Trailing: a floor that follows you up. $100,000 (start): Static floor (2-Step) $90,000, End-of-day trailing floor (1-Step) $90,000; $104,000: Static floor (2-Step) $90,000, End-of-day trailing floor (1-Step) $94,000; $107,000: Static floor (2-Step) $90,000, End-of-day trailing floor (1-Step) $97,000; $103,000 (after giving some back): Static floor (2-Step) $90,000, End-of-day trailing floor (1-Step) $97,000 (it does not fall)
Trailing: a floor that follows you up: the figures from this section at a glance.
Balance at midnightStatic floor (2-Step)End-of-day trailing floor (1-Step)
$100,000 (start)$90,000$90,000
$104,000$90,000$94,000
$107,000$90,000$97,000
$103,000 (after giving some back)$90,000$97,000 (it does not fall)

The last row is the difference in one line. After a run to $107,000 and a pullback to $103,000, the static account has $13,000 of room; the trailing account has $6,000. Some firms trail intraday equity instead of the closing balance, which is stricter still: our trailing drawdown guide works through that version.

How it interacts with the daily limit

The two rules run at the same time, and whichever floor is higher at a given moment is the one that closes you. Early in a static account, the daily limit is usually the binding rule. Late in a trailing account, after a good run, the maximum loss floor can sit closer than the daily one.

Illustrative example: which floor bites first

On a $100,000 FTMO 2-Step account at a $92,000 balance, the daily floor for the day is $87,000 (5 per cent below the morning balance) but the static maximum floor is $90,000. Here the overall floor is the one that would close the account, after just a $2,000 loss.

Trading with a maximum loss in mind

  • Know your distance to the floor before every session, not just your daily allowance.
  • On a trailing account, bank profit steadily rather than letting one big run raise the floor a long way.
  • When you are close to the floor, cut position size: a smaller account needs smaller trades to survive the same losing streak.
  • Read whether the floor trails balance or equity, and whether it ever stops rising. That one sentence in the terms changes your risk.

Rules differ by firm and by plan, and they change. The figures here are FTMO’s published rules, checked in October 2026; confirm the current terms on the firm’s site before you buy a challenge.

Maximum loss across firms

Firm and planMaximum lossType
FTMO 2-Step10% of the starting balanceStatic
FTMO 1-Step10%Trailing, end of day
FTMO Instant10%Trailing, intraday
FundedNext Stellar 2-Step10%Static
FundedNext Stellar 1-Step6%Static
FundedNext Stellar Lite8%Static
FundedNext Stellar Instant6%Trailing
Topstep Trading Combine ($50K)$2,000Trailing on end-of-day balance, locks at start

Balance vs equity

Whether the floor is tested against balance or equity matters as much as whether it moves. Most firms test the maximum loss against equity, so an open losing trade can breach it before you close it. Topstep, for example, says open losses count and touching its limit during the day liquidates the account. Treat the floor as a line your equity must never touch, not your closing balance.

Managing distance to the floor

  • Write today’s floor and today’s distance to it before the first trade.
  • If the distance is less than three times your normal risk per trade, cut size.
  • Avoid holding several positions whose combined stops reach the floor.
  • On trailing plans, bank profit regularly so the floor does not trail a high you then give back.
Illustrative example: distance-based sizing

A trader on a $100,000 static account has fallen to $93,000, so the $90,000 floor is $3,000 away. Their normal risk is $500, leaving room for six losses. They cut to $250 per trade, which gives twelve, while they rebuild.

Our drawdown calculator shows how losing streaks add up at different risk levels.

Key terms

Maximum Drawdown on a Prop Account, Explained: Key terms. Floor: The equity level at which the account is closed; Static: A floor that never moves; Trailing: A floor that rises with your highs and does not fall; Lock: The level at which a trailing floor stops rising
Maximum Drawdown on a Prop Account, Explained: Key terms: the figures from this section at a glance.
TermMeaning
FloorThe equity level at which the account is closed
StaticA floor that never moves
TrailingA floor that rises with your highs and does not fall
LockThe level at which a trailing floor stops rising

For the related rules and how to size around them, see these guides.

The short version

Know whether your floor is static or trailing, whether it is tested on balance or equity, and where a trailing floor locks. Then write today’s floor down before you trade, and size so that a normal losing streak cannot reach it.

For a plan-by-plan view of how each firm sets its limits, see our prop firm rules compared table, which we update when firms change their rules.

Cite this guide

FX Recap, "Maximum Drawdown on a Prop Account, Explained", updated 14 October 2026, https://fxrecap.com/prop-trading/maximum-drawdown-explained

Free to quote with a link. Journalists: data and comment in our press room.

Frequently asked

What is maximum drawdown on a prop firm account?

It is the lowest your account may fall, at any time, before it is closed. At FTMO it is 10 per cent of the starting account: a static floor on the 2-Step Challenge and an end-of-day trailing floor on the 1-Step.

What is the difference between static and trailing drawdown?

A static floor is fixed from the starting account and never moves, so it becomes more forgiving as you profit. A trailing floor rises with your account's highs and never falls, so giving back profit brings you closer to it.

Does FTMO use trailing drawdown?

On the 1-Step Challenge, yes: an end-of-day trailing limit 10 per cent below the highest midnight balance, which only rises. The 2-Step Challenge uses a static 10 per cent limit from the starting account.

Which is stricter, the daily limit or the maximum loss?

Whichever floor is higher at the time. Early on the daily limit usually bites first; after losses on a static account, or after a run on a trailing account, the maximum loss floor can be the closer one.

Is maximum drawdown measured on balance or equity?

Usually equity, including open trades, so an open loss can breach the floor. Topstep says open losses count and touching its limit during the day liquidates the account.

What is FundedNext's maximum loss?

10 per cent static on Stellar 2-Step, 6 per cent static on 1-Step, 8 per cent static on Lite, and 6 per cent trailing on Instant.