Drawdown Rules, Decoded: Which Type Is in Your Firm’s Fine Print

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Drawdown language gets messy fast. Use this page to identify the type of rule in a firm’s own rule document, spot what can trip you up, then jump to the comparison or calculator when you need firm-by-firm details.

Use the firm’s current rule page as the source. This guide explains the mechanism. It does not list current firm rule values.

60-Second Answer

Drawdown Rule Identifier

Open the firm’s rule document and answer only what the document clearly says. If one answer is missing, treat the rule as a source gap before buying or trading.

1. Does the breach level move up as the account profits?

No. It appears fixed. Yes. It trails upward. I cannot tell from the document.

2. If it trails, when does it update?

End of day or after close. Intraday, live equity, or high-water mark. The timing is not clear.

3. Does the trail stop at a stated cap or lock point?

Yes. It names a cap, lock, or stop level. No stated cap or lock found. I cannot verify the stop point.

4. Is there a separate daily loss cap on top?

Yes. A per-day cap is separate. No separate daily cap found. The daily rule is unclear.

Answer the four checks

Your result will show the likely mechanism and the exact confusion points to verify in the official rule text.

Unclear – source gap

Do not guess. If the document does not clearly answer one of these checks, ask the firm before buying, sizing trades, or assuming another firm’s rule works the same way.

• Most common gap: whether open equity can move the breach level.
• Second gap: whether the reset is based on the firm’s trading day, not your local clock.
• Use screenshots or social posts only as clues, not as the rule source.

Likely type: static drawdown

The breach level appears fixed. The main trap is assuming profits raise the safety line when the rule does not say that.

• Verify whether the firm uses balance, equity, or another metric.
• Check whether the static line changes after scaling, payout, or account-stage events.

Likely type: end-of-day trailing drawdown

The rule appears to trail after the trading day closes. The trap is treating intraday gains as if they always move the threshold.

• Find the firm’s close or reset time.
• Check whether the rule uses closed balance, equity, or account value at review.

Likely type: intraday trailing drawdown

The rule appears to trail during the session. The trap is that open profit can raise the breach level before the trade is closed.

• Watch language like intraday equity, highest account value, or real-time trailing.
• Check whether a pullback from open profit can cause a breach.

Likely type: capped or locked trailing drawdown

The rule appears to trail until a stated stop point. The trap is missing the exact cap, lock point, or account stage where the trail stops.

• Find the level where the trail stops moving.
• Check whether that lock applies during evaluation, funded status, or both.

Add-on: daily loss rider

A daily cap can breach an account even if the max drawdown line is still safe. The trap is missing the firm’s reset time or whether open trades count.

• Verify the daily reset time and time zone.
• Check whether the cap uses balance, equity, closed P/L, or a mix.

See which firms use each drawdown type Simulate your numbers in the drawdown calculator

Drawdown Types Compared

How Each Type Works

Daily loss limit

A daily loss limit is the most an account can lose inside the firm’s trading day under that firm’s rule language. Reset time and calculation basis matter.

Invented-numbers example: a fictional $77,777 account has an arbitrary 3.3% daily loss limit on equity. The fictional daily limit is about $2,566, so touching about $75,211 before the firm’s reset may hit the daily boundary even if trades later recover.

Static drawdown

A static drawdown rule sets a breach level that does not move up with profit unless the rule document says it does. The simple question is: where is the line, and what metric touches it?

Invented-numbers example: the same fictional $77,777 account has an arbitrary $2,222 static drawdown. The fictional breach level is $75,555. If the account rises to $80,000, the static line remains $75,555 unless the firm says it changes.

End-of-day trailing drawdown

An end-of-day trailing rule moves from the firm’s stated end-of-day value, not necessarily from every open profit spike during the session.

Invented-numbers example: a fictional account touches $80,000 intraday but closes at $78,500. Under an end-of-day method, the trail may use the close value instead of the intraday high, depending on the firm’s wording.

Intraday trailing drawdown

An intraday trailing rule can move while trades are open. That can shrink room after a winning trade runs up and pulls back.

Invented-numbers example: a fictional $77,777 account has an arbitrary $2,222 trail based on highest intraday equity. If equity reaches $80,000, the fictional breach level may trail to $77,778 even though the starting balance was lower.

Capped or locked trailing drawdown

A capped or locked trail moves until the firm-defined stop point. The important part is not just that it locks, but exactly where and when it locks.

Invented-numbers example: a fictional trail may rise as the account profits, then stop moving once a stated lock level is reached. If the document does not name the lock point, treat that as a source gap.

After a breach: do not assume the next step is the same across firms. Use the Reset Cost Calculator to think through reset economics after you verify the firm’s official reset path.

How to Read a Firm’s Drawdown Rule

Use this drawdown-specific checklist while the firm’s rules, help center, terms, and payout pages are open. For the broader buying review, use the Prop Firm Research Checklist.

• Find the official source: rule page, help center, terms, or account FAQ.
• Identify the metric: balance, equity, closed P/L, unrealized P/L, intraday high, end-of-day value, or another metric.
• Check the timing: real time, end of day, reset time, payout review, or evaluation close.
• Check the account stage: evaluation, funded, scaling, payout request, or all stages.
• Look for riders: daily loss caps, news rules, overnight holds, copy trading limits, outages, or market halts can sit outside the max drawdown line.
• Record the date: prop firm rules can change, so save when you checked the source.

Drawdown FAQ

Does drawdown include open trades?

It depends on the rule language. If the rule uses equity, open trade movement may matter. If it uses closed balance or end-of-day values, the timing and review point matter more.

Is trailing drawdown always worse than static drawdown?

No single label answers that. The reference point, update timing, lock point, account stage, and trading sequence decide how tight the rule feels.

What is end-of-day trailing drawdown?

It generally means the threshold updates after the trading day closes instead of every time intraday equity makes a new high. The firm’s own document controls the exact meaning.

Can a profitable account still breach drawdown?

Yes. A trailing threshold can move up after gains, and a later pullback can touch the breach level even while the account remains above its starting balance.