Maximum drawdown is the single rule that ends most funded accounts, and it's also the rule most traders misread. "6% drawdown" is not one rule — it's at least three different calculations wearing the same name.
Static drawdown (from the starting balance)
The floor is fixed at the starting balance minus the allowance, and it never moves.
On a $50,000 account with 6% static drawdown, the floor is $47,000 permanently. Grow the account to $56,000 and the floor is still $47,000 — you now have $9,000 of room.
This is the most forgiving type. Profit genuinely becomes a cushion.
Trailing drawdown (follows your high-water mark)
The floor moves up behind your highest balance — or, on some programmes, your highest equity, which includes unrealised profit on open positions.
On a $50,000 account with a $3,000 trailing allowance:
| Peak reached | Floor |
|---|
| $50,000 | $47,000 |
| $52,000 | $49,000 |
| $54,000 | $51,000 |
Two things make this dangerous. First, the floor never comes back down, so a good day permanently raises the bar. Second, when it trails on equity, a trade that goes $1,500 in your favour and then comes back to breakeven has cost you $1,500 of drawdown room without ever showing a loss in your results.The trap
with equity-based trailing, letting a big winner give back most of its profit is exactly as damaging as taking a loss of the same size — and it doesn't appear anywhere in your win rate.
Trailing-then-locking drawdown
A common hybrid. The floor trails your high-water mark until it reaches the starting balance, then stops permanently.
On that $50,000 account, the floor trails up until you've made $3,000 of profit, at which point it locks at $50,000 and stays there. From then on you're trading with the original balance as a hard floor and everything above it as cushion.
This is why the first $3,000 of profit is the hardest phase of many programmes: until the lock triggers, every gain tightens your own leash.
Intraday vs end-of-day calculation
Separate from the type is when the floor is measured.
End-of-day: the high-water mark updates once, on the daily close. Intraday spikes don't tighten the floor, and intraday dips don't breach it as long as you finish above the line.
Intraday / real-time: every tick counts. A wick that dips below the floor breaches the account even if price recovers seconds later and you close the day green.Real-time calculation combined with equity-based trailing is the strictest combination in the industry. If that's what you're trading under, your effective room is smaller than the headline number suggests — treat the stated allowance as roughly two-thirds of itself and size accordingly.
How to find out which one applies to you
Ask the programme these four questions in writing, or find each answer in the rulebook:
Is the drawdown calculated on balance or equity?
Does the floor trail, and if so does it lock at any point?
Is it measured in real time or at the daily close?
Does the high-water mark use closed trades only or open profit too?Four short answers change the whole risk plan. A strategy that's comfortably safe under static, end-of-day drawdown can be structurally unpassable under real-time equity trailing.
Sizing against each type
Whatever the type, the sizing logic is the same: divide the usable room by the number of consecutive losses you must be able to survive.
Static: usable room is the full allowance, and it grows with profit. Risk per trade ≈ allowance ÷ 15.
Trailing (balance): usable room is the full allowance, but it doesn't grow — banking profits tightens the floor behind you. Risk per trade ≈ allowance ÷ 18.
Trailing (equity), real-time: usable room is the allowance minus whatever open profit you routinely give back. Risk per trade ≈ allowance ÷ 20, and take partial profits early.Run your own numbers with the prop firm risk calculator, then check how likely the losing streak is with the risk of ruin calculator.
The practical habits that protect drawdown room
Bank partials. Under equity trailing, unrealised profit you hand back is real drawdown. Under static drawdown it costs you nothing. Know which you're in.
Avoid holding through scheduled high-impact news unless that's your documented strategy — a gap through your stop ignores the level entirely.
Track the floor on your platform, not in your head. Write today's number on a sticky note if you have to. Most breaches happen because the trader was computing from last week's balance.
Treat a recovery day as a normal day. Trying to win back yesterday's loss is how a 2% dip becomes a 6% breach.The short version
Static is forgiving. Trailing on balance is manageable. Trailing on equity in real time punishes exactly the behaviour most traders think is safe — letting winners run and giving some back. Find out which one you're under before you size a single position.
SimpleAlgo does not sell funded accounts, does not operate an evaluation programme, and has no affiliate relationship with any proprietary trading firm. Nothing here is financial advice, and trading carries a substantial risk of loss. Always read the current rulebook of any programme you join — terms change frequently.
