Prop Firm Drawdown Rules Explained: Daily Loss, Max Loss, Static and Trailing
Every failed evaluation dies on a drawdown rule. A complete guide to daily loss limits, max drawdown, static vs trailing, and how to trade inside them.
Drawdown rules are the entire game
Ask any evaluation firm where participants fail and the answer is unanimous: loss limits. Not the profit target, not the time, not the consistency rule. Understanding exactly how the drawdown rules work is worth more than any entry strategy, because the rules define the playing field your strategy lives on.
There are three rules to understand, and they stack.
Rule 1: the daily loss limit
A cap on how much your simulated equity can fall in a single trading day. At Funded With Forex it is 3% of starting balance, so $3,000 on a $100K account. Two details people miss:
- It is measured on equity, not closed profit. An open position down $2,900 has you a spread widening away from a breach even if you never close it.
- It resets at a fixed time, 5pm Eastern. A losing position carried through the reset counts against the new day from its reset price, not your entry.
The practical rule: stop trading when you are down half your daily cap. Three half sized losers should be your worst day, never one full sized disaster.
Rule 2: the maximum drawdown
The floor under the whole account. Breach it and the evaluation or funded account ends. The industry has two versions, and the difference decides careers.
Static drawdown is fixed from starting balance. A $100K account with 6% static max loss fails at $94,000, forever, no matter how high the account climbs first.
Trailing drawdown follows your high water mark. Run the account to $108K and a 6% trailing line sits at $101,520. A pullback that would be a normal Tuesday on a static account becomes a terminal breach on a trailing one.
Funded With Forex uses static drawdown on every account. The reasoning is simple: trailing rules select for traders who get lucky fast and punish the ones who manage drawdown like professionals. We covered the mechanics in depth in our trailing drawdown explainer.
Rule 3: the consistency cap
No single day may contribute more than 50% of your total profit. It cannot end your account, but it can delay passing: if one monster day is 70% of your gains, you keep trading until the rest of your days catch up. Plan for it by aiming for repeatable singles instead of one home run.
Sizing inside the rules
Work backward from the daily cap. With a 3% daily limit and a personal stop after two losers, risking 0.75% per trade means even your worst legal day leaves the account alive and the max drawdown untouched. Our position sizing guide gives the one line formula.
The traders who pass treat the drawdown rules as the strategy. Entries are just details.