Prop firm drawdown rules define an account value that must not fall below a loss boundary. A static boundary stays tied to starting capital; a trailing boundary rises with a specified high-water mark. Intraday and end-of-day trailing rules differ in when that reference updates. Daily loss limits add a separate boundary that resets each day. The decisive details are balance versus equity, the loss amount's denominator, the reset time and the firm's breach wording.
This guide belongs to the forex risk management library. The generic models below are not any firm's rulebook. The FTMO section quotes FTMO's own published Trading Objectives, as of 26 September 2026.[1] Prop firm rules change and differ by programme, so check your own firm's current terms before relying on any number here.
Prop firm drawdown rules at a glance
Scroll horizontally to read every column.
| Rule model | How the floor is set | What the label leaves unanswered |
|---|---|---|
| Static overall loss | Starting capital minus a fixed permitted loss. | Whether balance, equity or another defined account value is tested. |
| Intraday trailing loss | A specified high-water mark updates during the session. | Whether unrealised gains raise that high-water mark. |
| End-of-day trailing loss | The high-water mark updates at a defined daily observation. | Whether the resulting floor is enforced throughout the next day. |
| Daily loss | A daily reference minus that day's permitted loss. | The reset timezone, included costs and treatment of open positions. |
Updating the floor and checking for a breach are different operations. A floor calculated from yesterday's closing balance can still be compared with today's floating equity. “End-of-day” alone does not establish that intraday losses are ignored.
What is the difference between static and trailing drawdown?
Define B0 as initial capital, D as a permitted loss in account currency, Ht as the eligible running high-water mark and Ft as the floor. The following models assume a fixed cash buffer, no withdrawal adjustment and no cap on the trailing floor.
Static floor = B0 − D
Trailing floor at time t = Ht − D
Headroom at time t = monitored account value − Ft
A static floor stays put after gains. A trailing floor follows eligible new highs and does not retreat when the account falls. If the agreement says trailing stops at a cap, or a withdrawal changes the baseline, that extra rule must enter the calculation.
A percentage label needs a denominator. If D is 10% of initial capital, the cash buffer stays constant. If the rule instead permits 10% below each new high, the floor is Ht × (1 − 0.10). Those are different models.
For an illustrative 100,000 USD account reaching a 108,000 USD high, a fixed 10,000 USD buffer gives a 98,000 USD floor. A 10% buffer against that new high gives 97,200 USD. The 800 USD difference comes entirely from the denominator.
Worked example: one equity value, three drawdown floors
Illustrative numbers, not a recommendation or a firm's published limits. Initial capital is 100,000 USD and the fixed loss buffer is 10,000 USD. The highest eligible day-end balance so far is 102,000 USD. During the current session, equity reaches 108,000 USD and later falls to 96,000 USD.
| Illustrative rule | Floor | Headroom at 96,000 USD equity |
|---|---|---|
| Static, initial-capital reference | 100,000 − 10,000 = 90,000 USD | 6,000 USD above the floor |
| Day-end balance trailing | 102,000 − 10,000 = 92,000 USD | 4,000 USD above the floor |
| Intraday equity trailing | 108,000 − 10,000 = 98,000 USD | 2,000 USD below the floor |
The example's three rules monitor current equity. Only their reference changes. Under the intraday equity model, an unrealised gain raised the floor even if none of that gain was realised. A later reversal can cross that floor while the account remains above its original static boundary.
Positive headroom here means only that the account is above the stated floor at this observation. A daily loss rule, a prior breach or another contract condition can still apply. Equality also needs a definition: “below” and “at or below” produce different boundary cases.
Why do equity and balance produce different answers?
MT5's balance excludes the result of open positions. MetaQuotes defines equity as balance plus credit, minus commission, plus or minus floating profit or loss, minus blocked amounts.[2]
For the examples on this page, credit and blocked amounts are zero. All booked charges are already in balance, and the stated floating result includes the remaining adjustments. Under those assumptions, equity equals balance plus the floating result.
Record two separate choices in a rule specification:
- Reference value: what raises or resets the floor, such as initial balance, eligible day-end balance or intraday peak equity.
- Monitored value: what is compared with the floor, such as current equity including open losses.
A balance-based reference does not imply a balance-only breach test. Likewise, MT5's account equity is not automatically identical to a firm's defined risk metric. Match the treatment of commissions, swaps, credits and cash movements explicitly.
How do FTMO's published drawdown rules work?
FTMO publishes separate Trading Objectives for its 1-Step and 2-Step programmes. As of 26 September 2026, both define the tested value as equity, “Balance + Open Positions P/L ± Swaps – Commissions”. The rule is violated “If the equity drops below this limit”.[1] Floating results, swaps and commissions therefore count, and the reset uses the balance recorded at 00:00 CE(S)T.
| FTMO rule, as published | 2-Step: Challenge, Verification and FTMO Account | 1-Step: Challenge and FTMO Account |
|---|---|---|
| Maximum Daily Loss amount | 5% of the Initial Simulated Capital | 3% of the Initial Simulated Capital |
| Daily limit | Balance at 00:00 CE(S)T minus that amount; Initial Simulated Capital on the first day | The same calculation with the 3% amount |
| Maximum Loss | Static: Initial Simulated Capital minus 10% of it | End-of-day trailing: highest 00:00 CE(S)T balance, or initial capital if higher, minus 10% of initial capital |
Both amounts use the Initial Simulated Capital as denominator. The daily allowance is therefore a fixed cash figure, not a percentage of each day's balance. FTMO says the 1-Step Maximum Loss Limit “can only increase, but never decrease”, and resets when a Reward is withdrawn and a new FTMO Account is provided.[1]
The published wording uses “below”, and the pages do not separately address equity exactly equal to the limit. Treat that boundary case, and anything not listed here, as a question for FTMO. This page summarises the Trading Objectives page only; the account terms and any later rule update take precedence. The FTMO rules guide for automated traders covers the wider rulebook.
How can a daily reset create a breach without a new trade?
FTMO's 2-Step daily rule gives a clean worked example, because its reference is balance but its test is equity. For a 100,000 USD account, the published daily amount is 5% of 100,000 = 5,000 USD.[1]
Daily limit = balance at 00:00 CE(S)T − 5% × Initial Simulated Capital
Illustrative account values, applied to the rule as published on 26 September 2026. Day 1 begins at 100,000 USD, so its limit is 95,000 USD. Closed trades bring balance to 102,000 USD after booked costs. Positions still open show a net floating loss of 6,300 USD, including swaps and commissions.
- Current equity = 102,000 − 6,300 = 95,700 USD.
- Before midnight, headroom = 95,700 − 95,000 = 700 USD.
- At 00:00 CE(S)T the limit is recalculated from the 102,000 USD balance: 102,000 − 5,000 = 97,000 USD. FTMO's own Day 2 example reaches the same 97,000 USD figure.
- With equity unchanged, headroom becomes 95,700 − 97,000 = −1,300 USD: equity is below the new limit.
The moving boundary caused the crossing. No new order or adverse price move was needed at the reset. A rule that recalculated from reset-time equity would give a different result. The daily loss limit and circuit-breaker guide separates the measurement from the action taken.
CE(S)T is Central European Time or Central European Summer Time, so the reset moves against UTC when European clocks change. TradingView separates its chart display timezone from Pine's calculation timezones.[3] A chart midnight, broker midnight and contractual day boundary need not coincide.
How can an automated strategy breach a limit between bars?
A bar-close check observes one point in time. A rule that monitors equity during the bar can detect a crossing before that check runs. In an illustrative account with a 95,000 USD floor, equity could reach 94,800 USD during a bar and recover to 95,400 USD at the close.
Unless otherwise specified, a TradingView strategy executes once per closed bar. Historical fills use the broker emulator's chart-data assumptions.[4] A close-to-close backtest therefore cannot certify every intraday equity observation on another platform.
Testing the control means checking the timestamped account value when the rule crossed, the detection time, the action requested and the remaining positions. A recovery at bar close does not erase an earlier crossing under a continuously enforced rule.
Portfolio scope also matters. Two strategies using separate charts can affect the same receiving account. The portfolio heat guide explains the difference between a per-trade amount and combined account exposure.
What do PineConnector's daily limits actually establish?
PineConnector's EA settings reference, as of 26 September 2026, documents Daily Loss against the day's starting balance. A value up to 1 is a proportion of that balance; a value above 1 is a cash amount. The actions are Halt EA, Close All Positions, and Close All Positions and Halt EA.[5]
Matching the name “daily loss” is insufficient. The baseline, units, reset boundary, monitored value, affected positions and final broker outcome must match the intended rule. For example, 5% of a 102,000 USD daily balance is 5,100 USD, while FTMO's 2-Step allowance on a 100,000 USD account is a fixed 5,000 USD. These are arithmetic examples, not suggested EA inputs.
The reset boundary also differs. The EA's Daily Timezone is a numeric GMT offset, and the reference asks you to confirm the actual reset time in the Experts log.[5] A fixed offset and a CE(S)T midnight can drift apart across a clock change.
Automatic enforcement of a particular firm's complete drawdown rules is not documented; test on demo. Halting is not evidence that positions closed. A closure request still requires broker acceptance and a deal, and the docs require checking final order state and the EA's active or halted state.[5][6]
The execution path remains separate: condition, alert trigger, webhook delivery, PineConnector processing, EA request, broker acceptance, deal and position. An accepted broker-side stop is distinct from a strategy-only close rule.[2] The prop firm automation checklist covers the wider rules review; using a bridge does not establish eligibility or compliance.
Frequently asked questions
What is trailing drawdown versus static drawdown?
A static drawdown floor remains tied to a fixed starting reference. A trailing floor rises when a specified high-water mark rises and normally does not move back down after losses. The contract must define whether the high-water mark uses balance or equity, when it updates, and whether the allowed buffer is a fixed cash amount or a percentage.
Does end-of-day drawdown ignore intraday losses?
Not necessarily. End-of-day can describe when the trailing reference updates while current equity is still monitored throughout the session. FTMO's 1-Step Maximum Loss, for example, updates from the 00:00 CE(S)T balance but is breached if equity drops below the limit. Read the update schedule and the breach test separately.
What is FTMO maximum daily loss?
As published on 26 September 2026, FTMO's Maximum Daily Loss limit is the balance at 00:00 CE(S)T minus a fixed amount: 5% of initial capital on 2-Step accounts, 3% on 1-Step. Equity, including open P/L, swaps and commissions, must not drop below it. FTMO's rules can change, so check its current Trading Objectives.
Can an account breach a loss limit while its balance is above the floor?
Yes, if the rule tests equity and open losses take equity below the floor. Balance and equity answer different questions: balance excludes open-position results, while equity includes them and other account adjustments. A balance-based reference can still be paired with an equity-based breach test, so both parts of the rule need to be explicit.
Reviewed 26 September 2026. Facts were checked against the linked sources on that date. Nothing in this article was tested on a trading account and no code was compiled.
Related reading
- Forex risk management library
- Daily loss limits and circuit breakers
- Correlated exposure and portfolio heat
- FTMO rules for automated traders
- Prop firm automation checklist
Sources
- FTMO – Trading Objectives (1-Step and 2-Step), accessed 26 September 2026.
- MetaQuotes – Executing trades: balance, equity and server-side stops, accessed 25 September 2026.
- TradingView – Time, accessed 25 September 2026.
- TradingView – Strategies: calculation behaviour and broker emulator, accessed 25 September 2026.
- PineConnector – EA settings reference: daily and cumulative protection, accessed 25 September 2026.
- MetaQuotes – Basic principles: orders, deals and positions, accessed 25 September 2026.
PineConnector executes the instructions you send it. It does not select trades, manage money, or hold funds. Trading carries risk, and past performance of any strategy does not indicate future results.
