Prop Firm Basics7 min read

Prop Firm Drawdown Explained: Daily, Maximum, and How It Is Measured

Drawdown is the amount an account has fallen from a reference high point, and it is the mechanism every prop firm uses to control risk on accounts it has not directly observed being traded. Two drawdown rules usually apply at once — a daily limit and a maximum limit — and the details of how each is calculated vary enough between firms that misunderstanding them is one of the most common reasons an otherwise sound trading approach fails an evaluation.

Getting this right means understanding four separate questions: what is the drawdown measured against, is it calculated on balance or on equity, does the limit reset daily or accumulate, and is the maximum limit fixed or does it trail the account's high-water mark upward. Each of these changes how much real room a trader actually has.

Daily drawdown vs maximum drawdown

Daily drawdown limits how much an account can lose within a single trading day, typically reset at a fixed time each day regardless of what happened the day before. Maximum drawdown limits how much the account can lose in total from its starting balance across the entire evaluation or funded period, and does not reset.

On MixFunded's standard evaluation programs, the daily drawdown limit is 5% and the maximum drawdown limit is 10%, both calculated from the account's starting balance. This means the daily limit is effectively a subset of the total room available — a trader could theoretically use the full daily allowance on two separate days and be at the maximum limit, so the two rules need to be tracked together, not in isolation.

Balance-based vs equity-based measurement

Balance is the account value with no trades currently open; equity is balance adjusted for any floating profit or loss on open positions. A rule measured on balance only checks drawdown once a trade closes, so an open losing position that has not yet been closed does not count against the limit yet. A rule measured on equity counts unrealised losses immediately, which means a large open drawdown on a single held position can breach the limit even before you close it.

This distinction matters most for traders who hold positions overnight or through news, since equity can move sharply on an open trade in a way balance cannot until the position is closed. Always confirm which measurement a program uses before assuming how much room a currently open trade is using.

Static vs trailing maximum drawdown

A static maximum drawdown is fixed to the account's starting balance and does not move once set. A trailing maximum drawdown moves upward as the account's equity reaches new highs, meaning the amount of room available to give back can shrink as the account becomes more profitable, which is a materially harder rule to trade under because early gains do not create durable breathing room.

MixFunded's evaluation and Pay After Passing programs use a maximum drawdown fixed to the starting balance rather than a trailing calculation. The Instant Funded program uses a static 6% maximum drawdown, again fixed rather than trailing. Static limits are generally easier to plan around because the amount of room does not reduce as the account grows.

Worked example on a $50,000 account

Take a $50,000 MixFunded 2-Step evaluation account. The daily drawdown limit of 5% is $2,500, meaning the account cannot lose more than $2,500 in a single day, measured from the balance or equity at the start of that trading day. The maximum drawdown limit of 10% is $5,000 measured from the original $50,000, so the account fails if total losses from the starting balance ever reach that figure, regardless of how many days it took to get there.

If a trader loses $2,000 on day one, they still have $500 of room on day two before hitting that day's limit, but they now have only $3,000 of room left against the overall $5,000 maximum before the account is closed for a breach. This is why tracking cumulative drawdown across the whole evaluation, not just each day in isolation, is necessary to avoid an accidental breach later on.

Daily drawdown resets each trading day; maximum drawdown does not
Balance-based rules count losses on close; equity-based rules count them live
Static maximum drawdown stays fixed to the starting balance; trailing drawdown moves up with equity highs

Frequently asked questions

What is the difference between daily and maximum drawdown?

Daily drawdown limits losses within a single trading day and resets each day, while maximum drawdown limits total losses from the account's starting balance across the whole evaluation or funded period and never resets. Both must be respected simultaneously since a series of days each using part of the daily allowance can still accumulate toward the maximum limit.

Is MixFunded's drawdown static or trailing?

MixFunded's evaluation and Pay After Passing programs use a maximum drawdown fixed to the account's original starting balance rather than a trailing figure, and the Instant Funded program uses a static 6% maximum drawdown. This means the amount of room available does not shrink as the account becomes profitable.

Does an open losing trade count toward drawdown before I close it?

That depends on whether the specific rule is measured on balance or on equity — equity-based rules count unrealised losses on open positions immediately, while balance-based rules only count a loss once the trade is closed. Traders should confirm which applies to their program before holding a position through a period of expected volatility.

Trade it on a funded account

MixFunded evaluations start from $5. Payouts are processed every Monday in USDT (TRC-20) and published on-chain.

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