Drawdown Floor
Drawdown & Loss LimitsThe minimum account balance or equity level before a prop firm terminates the account. If your balance or equity touches this level, the account is immediately closed and the evaluation or funded status is lost.
The drawdown floor is the hard boundary that defines your maximum allowable loss. It is calculated differently depending on the drawdown type: static floors are fixed at account opening, while trailing floors move upward as your account grows.
For static drawdown, the floor is simple: starting balance minus max drawdown percentage. A $100K account with 10% static drawdown has a permanent floor at $90,000. For trailing drawdown, the floor starts at the same place but rises as you profit. If you grow to $105,000, an EOD trailing floor moves to $95,000 (on a $10K drawdown).
The floor is typically checked against either balance (closed trades only) or equity (including open trade P&L). Equity-based floors are stricter because a large unrealized loss can breach the floor even if you haven't closed the losing trade. Understanding exactly how your firm calculates the floor is essential for survival.
Apex $50K with $2,500 trailing intraday drawdown: floor starts at $47,500. You make $3,000 intraday and your equity peaks at $53,000. Floor immediately moves to $50,500. You then give back $2,800 and equity drops to $50,200 -- below the $50,500 floor. Account terminated. The floor moved $3,000 up from $47,500 to $50,500 because of the intraday high.
Drawdown Floor directly affects whether you pass or fail a prop firm evaluation. Unlike trading your own account where you can recover from mistakes over time, prop firm rules create hard boundaries -- violate them once and you lose your challenge fee and have to start over. Drawdown rules are the number one reason traders fail prop firm evaluations. Understanding exactly how drawdown floor works at your chosen firm is not optional -- it is the foundation of every position sizing decision you make.
Practical example across firms: FTMO and TopStep handle this differently. FTMO is a 2-step firm with static drawdown and a 5% daily loss limit, starting from €155. TopStep is a 1-step firm with trailing drawdown and a 2% daily loss limit, starting from $49. These structural differences mean your approach to drawdown floor must adapt to whichever firm you choose.
Common mistake: Traders often assume all drawdown rules work the same way. They do not. The difference between static and trailing drawdown can mean the difference between surviving a losing streak and losing your account while still net profitable. Before starting any evaluation, calculate exactly how much room you have in dollar terms, not just percentages.
Trailing Drawdown
A maximum loss threshold that moves upward as your account reaches new equity highs. Unlike static drawdown, the floor rises with profits, meaning gains raise the minimum balance you must maintain.
Static Drawdown
A fixed maximum loss threshold set at account opening that never moves, regardless of how much profit you accumulate. Your drawdown floor stays at the same level for the lifetime of the account.
Equity-Based Drawdown
A drawdown calculation method that includes unrealized (open) trade profits and losses in the account value. Your equity fluctuates with every tick while positions are open, making this stricter than balance-based drawdown.
Balance-Based Drawdown
A drawdown calculation method that only considers closed trade results, ignoring unrealized profits and losses from open positions. Your balance only changes when trades are closed.
Margin Call
A notification or automatic action triggered when your account equity falls below the required margin level. In prop firm trading, margin calls are effectively replaced by drawdown limits -- the firm terminates the account rather than requesting additional funds.