What daily drawdown and max drawdown mean at a prop firm

A few terms first

• Prop firm: a company that lets you trade an account with the firm’s money. Usually you first pass an evaluation (challenge) account by following the rules and reaching a target, then move to a funded account.
• Daily loss limit: how much the account can lose in one day before it breaks the rules.
• Maximum drawdown: how much the whole account can lose before it breaks the rules.
• Floor: the lowest level your account may reach. Room: how much you can still lose before you reach the floor.
• Equity: your balance plus the profit or loss on trades that are still open.
• Server time, UTC, daylight saving time: server time is the clock your trading platform uses. UTC is the world’s standard time. Daylight saving time is when some countries move their clocks one hour forward in summer.
• Swap: an interest adjustment when you hold a trade overnight. Some traders use swap-free accounts, for example for religious reasons.
• Breach: reaching a limit. Depending on the firm, the account fails, or trading stops for the rest of the day.

This article is based on the published rules of eight firms in Europe, the UK, the US, the Middle East and elsewhere (one of them a futures firm), checked in October 2026. To avoid recommending any firm, we do not name them. Rules differ from firm to firm, change over time, and can differ between plans at the same firm, so check your own firm’s rules. Example amounts are in your account currency; the same idea works for a 5,000 or a 100,000 account.

Daily loss limit: where it is measured from

A “5% daily limit” can mean different things, depending on where it is measured from. In the rules we checked, there were three main types. The examples use a starting balance of 10,000 and a 5% daily limit.

Type 1: the room is a % of the starting balance; the floor is set from today’s opening balance

The room is always 10,000 × 5% = 500. If the account gained money the day before and today starts with a balance of 10,400, today’s floor is 10,400 − 500 = 9,900. Even above your starting balance of 10,000, reaching today’s floor breaks the rules.

Type 2: measured from the higher of today’s opening balance and equity

Today starts with a balance of 10,400, and you hold a trade overnight with +200 open profit. So your equity at the start of the day is 10,600.

The higher figure, 10,600, is used. With 500 of room, today’s floor is 10,100. If that open profit disappears, you have already used part of today’s room.

Type 3: same reference as type 2, and the room is a % of it

The reference is the same higher figure, 10,600, and the room is 10,600 × 5% = 530. Today’s floor is 10,600 − 530 = 10,070.

Do open losses, commission and swap count?

Most of the firms we checked counted closed results plus the loss on trades that are still open. That means you can break the limit without closing a trade, as soon as the open loss reaches it. Some firms say that commission and swap are included; others do not say.

When does the trading day reset?

The firms we checked reset the day at times such as midnight server time (UTC+2 / UTC+3), 5 pm US Eastern Time, midnight Central European Time, or 5 pm US Central Time. Midnight server time and 5 pm US Eastern Time are the same moment. In local time, that is:

If you live somewhere else, the MT5 server time converter shows what a given MT4/MT5 server time is in your local time.

What happens if you reach the limit?

In the rules we checked, some firms fail the account as soon as you reach it, while others close your open trades and suspend trading until the next day. The same firm can treat it differently on an evaluation account and a funded account.

Maximum drawdown: static and trailing

The limit for the whole account also comes in several types. The examples use a starting balance of 10,000 and 600 of room (6% of the starting balance).

Static

The floor is 9,400 and it never moves. Anything you gain adds to your room.

Trailing (the floor rises with your high)

The floor rises as your highest balance rises. Once your balance reaches 10,500, the floor is 10,500 − 600 = 9,900. If you then drop back to 10,000, you have only 100 of room left. You can be above your starting balance and still have very little room.

Trailing that stops

The floor stops rising once it reaches the starting balance (10,000). In this example, when the balance reaches 10,600 the floor stops at 10,000, and it stays at 10,000 even if the balance later reaches 10,800.

What the floor follows

Even among trailing types, firms differ in which high they follow, and some rules do not say clearly.

• The highest closed balance: open profit alone does not raise the floor.
• Room as a % of the high: some firms set the room as a % of the highest value, not of the starting balance. For example, with a high of 10,400 and 6%, the floor is 10,400 × 94% = 9,776.
• The end-of-day value: moves during the day do not raise it. The floor is set by the value at the end of the day (balance or equity, depending on the firm).
• If the floor follows a value that includes open profit, open profit raises the floor too. For example, a trade reaches +300 open profit, and then you close it with no profit or loss. Your balance is 10,000, but the floor is now 9,700, so you have 300 of room.

On futures prop firms

Some futures prop firms set limits as money amounts instead of percentages, and trail the end-of-day value. The daily loss limit can also be a money amount (for example, 1,000). On its evaluation account, one firm we checked resets the day at 5 pm US Central Time, raises the floor with the highest end-of-day balance, and stops raising it once the floor reaches the starting balance. However, open profit and loss during the day is checked against the floor immediately.

For example, with a 50,000 account and 2,000 of room:

• The floor starts at 50,000 − 2,000 = 48,000.
• One day the account reaches 51,500 during the day but ends the day at 51,000. The next day’s floor is 51,000 − 2,000 = 49,000 (the 51,500 during the day does not count).
• On that next day, if open losses take your equity down to 49,000, the rule is broken at that moment. The floor only rises at the end of the day, but open losses count immediately. Keep this combination in mind.
• Once the end-of-day balance reaches 52,000, the floor stops at 50,000 (the starting balance) and rises no further.

These numbers are only an example, and funded accounts can work differently. For futures, it also helps to check the rules on the maximum number of contracts, consistency rules (limits on how much of your profit can come from one day), and whether reaching the daily loss limit fails the account or only stops trading for the day.

Set your own line before the firm’s

Your firm’s limit is a line you must not cross. Setting your own, stricter limit ahead of it makes it easier to stop before you reach the firm’s.

• Turn your own daily limit into a money amount with the daily loss limit calculator. It also shows how many losing trades, at your chosen risk per trade, it would take to reach your daily limit.
• See how likely losing streaks are: the losing streak calculator and the article Losing streaks, in numbers.
• If your plan has a consistency rule: the prop firm consistency rule calculator shows what share of your profit your best day makes up. For your overall numbers, try the trading stats calculator.
• Don’t try to win it back after a drop: How to stop revenge trading.

Whatever the type, the most reliable check is the wording of your own firm’s rules. If anything is unclear, it is worth contacting your firm’s support team.

About the rules we checked

This article is based on the rules pages that firms published, checked in October 2026. To avoid recommending any firm, we do not list their names or links. Rules differ from firm to firm, can differ between plans at the same firm, and can change. Check your own firm’s rules page.