If you only learn one prop firm rule before paying for an evaluation, make it the drawdown model. It is the rule that quietly breaches more accounts than being unprofitable ever does. This guide explains the three models in plain English, with worked examples.
This is educational content, not financial or trading advice. Always confirm a firm’s exact drawdown rules on its official website.
What “drawdown” means
Drawdown is the maximum your account is allowed to fall before the firm closes it for breaching the rules. Every firm sets a number (say, $2,000 on a $50,000 account). What differs — and what matters — is how that limit moves as you trade.
There are three models.
1. Static drawdown
The loss limit is a fixed floor that never moves. On a $50,000 account with a $2,000 static drawdown, the account breaches if the balance ever touches $48,000 — no matter how much you were up earlier.
- Pros: simplest to understand; profits don’t drag your limit around.
- Cons: fewer firms offer it; sometimes paired with higher fees.
- Best for: beginners and anyone who wants predictable risk.
2. End-of-day (EOD) trailing drawdown
The loss limit trails your balance, but only recalculates at the market close, based on your closing balance. Intraday swings during the session do not move it.
Worked example on a $50,000 account, $2,000 EOD drawdown:
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You start with a limit at $48,000.
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Day 1 you close at $51,000 → after close, the limit trails up to $49,000.
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During Day 2 you dip to $50,200 intraday → the limit stays at $49,000 because it only updates at the close.
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Pros: much more forgiving than intraday for active traders.
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Cons: still trails, so consecutive winning days raise your floor.
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Best for: day traders who close positions flat each day.
3. Intraday trailing drawdown
The loss limit follows your highest equity in real time — including unrealised profit on open trades. This is the strictest model and the one that surprises people.
Worked example on a $50,000 account, $2,000 intraday trailing drawdown:
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You buy and the trade goes +$1,500 in your favour (equity peaks at $51,500).
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The trailing limit immediately moves up to $49,500.
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The trade reverses and you close at breakeven ($50,000).
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You never “lost” money on the trade, but your limit is now $49,500 and you have less room than you started with.
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Pros: often paired with cheap evaluations and large accounts.
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Cons: an open, unrealised spike can tighten your limit; easy to breach without a losing closed trade.
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Best for: experienced traders who take profit quickly and understand the mechanic.
Quick comparison
| Model | Updates | Counts unrealised gains? | Difficulty |
|---|---|---|---|
| Static | Never | No | Easiest |
| EOD trailing | At daily close | No | Moderate |
| Intraday trailing | Real time | Yes | Hardest |
Which should you choose?
- New to prop trading? Prefer static or EOD.
- Scalper who closes flat daily? EOD is usually comfortable.
- Comfortable with the mechanic and want a cheap large account? Intraday can work if you bank profit and don’t sit on open spikes.
Related reading
Disclaimer: Independent educational content, not affiliated with any firm and not financial advice. Trading leveraged products carries a high risk of loss. Some links may be affiliate links.