Understanding Prop Firm Drawdown Types

If there's one thing that separates traders who pass evaluations from those who don't, it's understanding drawdown rules. The drawdown type determines how much your account can decline before you're disqualified — and the way it's calculated makes a massive difference.

Let's break down each type.

Trailing Drawdown

With trailing drawdown, your maximum loss level moves up as your account reaches new highs. It never moves back down.

Example: You start with a $50,000 account and a $2,500 trailing drawdown. Your floor is $47,500. If your account grows to $52,000, your new floor becomes $49,500. Even if you never close a trade — if your open P&L hits $52,000 — the floor has moved.

Why it's tough: You can be profitable overall but still get stopped out. Imagine making $3,000, then giving back $2,501. You've still made $499, but you've hit your drawdown and failed the evaluation.

Best for: Disciplined traders who lock in profits and don't let winners turn into losers.

End-of-Day (EOD) Drawdown

EOD drawdown works like trailing, but it's only calculated at market close each day. Intraday fluctuations don't count.

Example: Same $50,000 account with $2,500 EOD drawdown. If your account hits $53,000 during the day but closes at $51,000, your floor is based on the $51,000 close — not the $53,000 peak.

Why it's more forgiving: You have room to take intraday heat without your drawdown floor ratcheting up on unrealized gains. This is huge for traders who hold positions through volatility.

Best for: Swing traders and anyone whose strategy involves holding through intraday pullbacks.

Static Drawdown

Static drawdown is the simplest type. Your maximum loss is a fixed dollar amount from your starting balance, and it never changes.

Example: $50,000 account with $2,500 static drawdown. Your floor is always $47,500, no matter how high your account grows. If you make $10,000 and your balance is $60,000, your floor is still $47,500.

Why traders love it: Once you're profitable, your drawdown effectively gets bigger relative to your current balance. It's the most forgiving type by far.

Best for: All trading styles. If a firm offers static drawdown, it's almost always an advantage.

Intraday Drawdown

Intraday drawdown tracks your loss in real-time during the trading session but uses different calculation methods than trailing. Some firms reset certain aspects daily.

Example: Implementation varies by firm. Some track the maximum unrealized loss at any point during the day. Others combine intraday limits with a separate overall drawdown.

Why it's tricky: The rules differ significantly between firms. Always read the fine print.

Best for: Day traders who close all positions before market close.

How to Use This Information

When comparing prop firms, sort by drawdown type to see your options:

The drawdown type should be one of the first filters you apply when choosing a firm. A cheaper evaluation with trailing drawdown might actually be harder to pass than a more expensive one with static drawdown.

Use our comparison table to filter accounts by drawdown type and find the setup that matches your trading approach.