Prop Firm “Drawdown” Guide - Intra vs EOD

The dotted red line at the very bottom of the picture is the max drawdown. If an account hits the max drawdown, that account is failed. It is quite literally the maximum drawdown. That’s why it’s sometimes referred to as the “maximum loss limit.” In this instance, the max drawdown is $2,000, and it only moves up when the account balance makes a new high. You can see that on day 9, the account balance was +$250, and the max drawdown was at -$1,000. If you opened a trade and the unrealized PnL got to $1,250, then the account would be failed. That’s because it would hit the max drawdown at -$1,000. On day 12, the account balance made a new high, and so the max drawdown moved up with it in order to still be $2,000 away. There’s much more to it than that though.

The big max-drawdown myth about prop firm trading

“The max drawdown follows the account balance forever.” No… The max drawdown stops moving up at the account’s starting balance. So, if your funded account starts at $50,000 and the max drawdown is $2,000, then the max drawdown would start at $48,000. Let’s say that 1 month later, your account balance is $57,000. Your max drawdown would’ve stopped at $50,000. It never goes higher than the account’s starting balance, which applies to funded accounts and evaluations. Anyways, let’s say you withdraw $3,000. The account balance would then be $54,000, and the max drawdown would STILL be $50,000.

Two types of trailing max-drawdown systems

First of all, remember that the max drawdown only moves up when the account balance reaches a new high.

1. Intraday

   • An intraday trailing drawdown trails the account’s highest unrealized balance, so this includes trades that haven’t been closed yet. In the scenarios below, you’ll see why I’ll never be partnered with a firm that uses this system (like Apex).

2. End-of-day (EOD)

   • An EOD drawdown is only calculated once the market has closed for the day. TradeDay, Topstep, and MyFundedFutures use this system.

     • No, lol, that doesn’t mean you can go -$100,000,000 as long as you make it all back before the market closes

Let’s say it’s day 1 of a new funded account.

Your first trade is $1,000 into profit at one point, and you close it later for a $500 win. You only take that trade. The intraday drawdown would move up by $1,000, because that was the highest unrealized account balance. The EOD drawdown would move up only $500, because that was the realized account balance at the end of the trading day.

Here’s another scenario for day 1 of a new funded account. Your first trade is $1,000 into profit but turns into a $200 loss. The intraday drawdown moves up by $1,000, and the EOD drawdown doesn’t move at all. Let’s pretend that instead of that, you ended up taking a second trade which brought the account balance to +$200 for the day. The intraday drawdown would move up by $1,000, but the EOD drawdown would only move up by $200. See why 0 traders with working brains like the intraday system?

Intraday trailing drawdown = anti-trader

End-of-day drawdown = pro-trader

So, which EOD-drawdown firm is right for you?

MyFundedFutures (starter) for the most affordable AND best firm - link (best discount coupon = Iman)

MyFundedFutures (expert) for aggressive payout strategies - link (best discount coupon = Iman)

The article in the bottom right will bring you to the page for the guide on prop firm evaluations.

Or

Click the button below for the full breakdown of the top prop firms

RISK AND AFFILIATE DISCLOSURE - Never risk money you can’t afford to lose!

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Most traders do not succeed. The links on this site are primarily affiliate links, which financially supports me at no extra cost to you. I partnered with multiple firms, because I don’t see 1 firm that has it all. Not being exclusive to one firm also helps to reduce bias, because I’m partnering with the firms that I think are the best.