Is drawdown measured on balance or equity?

It varies by firm. Equity-based is harder because it includes floating profit and loss in real time. Each firm page states the method in its rules section.

What happens if I breach the daily limit?

Most firms close the account and fail the challenge immediately; some offer a free or paid reset depending on the terms.

Trailing vs static — what is the difference?

Static is measured from the original balance and never moves. Trailing follows your equity high, so the stop-out level rises as you profit.

Prop Firm Drawdown Explained: Daily, Overall, Static and Trailing

A practical guide to prop firm loss limits: daily vs overall drawdown, static vs trailing, and how each is calculated with examples.

What is drawdown?

Drawdown is the maximum loss your funded account is allowed to take. Breaching it closes the account instantly, even if you were profitable an hour earlier. Every prop firm defines two limits: a daily one and an overall one.

Daily drawdown

The maximum loss allowed within one trading day, usually 3%–5% of account size. What trips most traders up is the reference point it is measured from:

From start-of-day balance: the most forgiving — open profits do not raise the limit.
From intraday peak equity: the strictest — if you go up then down, the loss is measured from the high.
The reset happens at a fixed server time (often 00:00 server), not your local time.

Overall (max) drawdown

The cumulative loss allowed over the life of the account, usually 6%–12%. It comes in two forms:

Static: measured from the original balance and never moves. A $100,000 account with 10% stops at $90,000, always.
Trailing: follows your highest equity. Reach $106,000 and the stop-out becomes $96,000.
Trailing until breakeven: the trail freezes once the account reaches initial balance plus the limit, then locks at the original balance. This is the trader-friendly variant.

Worked example

$50,000 account, 4% daily ($2,000) and 8% trailing overall ($4,000). Your equity peaks at $52,500, then drops to $50,400. That is $2,100 off the daily high — a breach if the firm measures daily loss from equity, but a $400 profit if it measures from start-of-day balance.

Mistakes that kill accounts without a big loss

Fees, spreads and commissions count toward the loss — keep a buffer.
Positions open at the reset time may roll into the next day or be auto-closed.
Stop-loss orders do not protect against weekend gaps.
Holding through a high-impact news release can breach the daily limit in seconds.

Choosing a firm with fair drawdown rules

Look for a static overall limit (or trailing that freezes at breakeven), a daily limit measured from start-of-day balance, and a clearly stated server time. Every firm page on Nexafinity lists these values as officially published, and any change is logged in our rule-change tracker.

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