Static Drawdown
Drawdown & Loss LimitsA 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.
Static drawdown is widely considered the most trader-friendly drawdown type. The floor is set once when the account is opened and never changes. If you start a $100K account with a 10% static drawdown, your floor is $90,000 permanently.
The key advantage is that profits create a genuine cushion. If you grow the account to $115,000, you have $25,000 of room before hitting the $90,000 floor. With trailing drawdown, that same $15,000 profit would have raised the floor to $105,000, giving you only $10,000 of room.
Firms like FTMO, The5%ers, and FundedNext use static drawdown. Traders who prefer swing trading or holding through news events typically favor static drawdown firms because temporary adverse excursions are less likely to terminate the account.
On FTMO $100K with 10% static drawdown: floor is permanently at $90,000. You grow the account to $120,000. Your cushion is $30,000. Even if you give back $20,000 in losses, your balance at $100,000 is still $10,000 above the floor. With trailing drawdown, that same scenario would have a floor at $110,000 and you would have been terminated.
Static Drawdown 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 static drawdown 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 static drawdown 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.
Drawdown Floor
The 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.
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.
Daily Loss Limit
The maximum amount you can lose in a single trading day before your account is flagged or terminated. This resets each day and is separate from your overall maximum drawdown.