Prop Firm
Daily Loss, Maximum Loss and Trailing Drawdown: what is the difference?
Understand three common prop-firm loss limits and why the same percentage can create very different risk constraints.
Two programs both advertise “10% max loss.” That alone does not tell you whether they use the same breach threshold. One may keep the floor fixed; another may update it based on a previous balance or equity high.
Three limits to distinguish
- Daily Loss: a loss threshold for a trading day. Check the reset time, the balance or equity used in the calculation and which fees are included.
- Maximum Loss: the overall floor that balance or equity must not cross. It can be static or rise under a trailing rule.
- Trailing Drawdown: a floor that may move up when the account reaches a new high. Check whether it follows balance or equity, updates intraday or at end of day, and whether it can move down again.
A hypothetical example
Suppose a program has a 10,000 USD account and a 5% daily loss limit calculated from the day’s starting balance. The daily threshold would be 500 USD; if open trades count, equity reaching that limit may trigger a breach. This is only an illustration because firms define their formulas differently.
With a static 10% maximum loss based on initial capital, the baseline floor would be 9,000 USD. Under a trailing rule, however, a new account high may move the floor up. Hypothetically, if equity reaches 11,000 USD and the trailing floor is 5% below that high, the floor becomes 10,450 USD. The account could then breach above 9,000 USD. Use the program’s actual calculation to work out its threshold.
Current program examples
As checked on the date below, official pages describe different structures:
- FTMO 2-Step: 5% Maximum Daily Loss; 10% Maximum Loss under FTMO’s end-of-day trailing calculation.
- The5ers High Stakes: 5% Maximum Daily Loss and 10% Maximum Loss.
- CTI 1-Step: 5% balance-based Maximum Trailing Drawdown and no Max Daily Drawdown.
- CTI 2-Step: 10% Maximum Static Drawdown and 5% Daily Drawdown calculated from each day’s starting balance.
- Audacity Ability One: 3% Daily Drawdown and 6% Maximum Drawdown.
- Audacity FTP: 5% Daily Trailing Drawdown based on the day’s highest equity and 10% Maximum Drawdown.
These figures belong to specific programs and can change. Read the formula, equity treatment and reset time on the program’s current page before buying a challenge.
Four questions to answer first
- When does the limit reset, and in which time zone?
- Do floating P/L, swap and commission count?
- Is the overall floor fixed or does it trail a high?
- How far can the floor move after the account makes a profit?
If you cannot answer these, do not judge a program only by the percentage. Broker vs Prop Firm explains the two models before you compare programs.
In Compare Prop Firms, you can select Manageable drawdown structure, then verify the current rules for the exact program.
