Risk 6 min read
Prop firm daily drawdown explained (and how not to break it)
Most funded-account challenges aren't failed on the profit target. They're failed on the daily drawdown, often on one bad afternoon.
How daily drawdown works
A daily drawdown limit (often 4–5%) caps how much your account can drop in one day. Some firms measure it from the day's starting balance, others from the starting equity including open trades. Read your firm's rules carefully: the difference matters.
Static vs trailing max drawdown
- Static: the floor stays at a fixed amount below your starting balance.
- Trailing: the floor moves up as your account makes new highs, so profits can be 'locked' against you.
- End-of-day trailing only moves the floor at the close, which gives more room during the day.
Habits that keep you safe
- Set your personal daily stop at half the firm's limit.
- Risk 0.5%–1% per trade so it takes several losses to get close.
- Stop after two losses in a row.
- Log every trade so you know exactly where you stand against the limit.
Questions traders ask
What is daily drawdown in a prop firm?
The maximum your account is allowed to lose in a single trading day before the challenge or funded account fails.
How do I avoid breaking the daily drawdown?
Use a personal daily stop below the firm's limit, small risk per trade and a stop-after-two-losses rule.