Max Drawdown

Max drawdown is the absolute loss ceiling for a funded account. Unlike daily loss limits, which reset every session, the max drawdown threshold persists for the life of the account. Cross it and the account is permanently terminated — no warning, no reset.

The reference point matters. Static max drawdown is measured against the starting balance and never moves. Trailing max drawdown moves up as the account reaches new equity highs. Some firms convert trailing to static once a profit milestone is hit; others keep it trailing for the account's entire life.

Most evaluation programs cap max drawdown between 5% and 12% of starting balance. Funded accounts tend to use slightly tighter limits than evaluation phases because the firm is now bearing actual capital risk. The interaction between daily loss limit and max drawdown also matters: a 3% daily limit on a 6% max drawdown means a trader has effectively two bad days before termination.