Prop Firm Drawdown Calculator

How prop firm drawdown works

Prop firm evaluations give you a trading account with a loss limit called the maximum drawdown. If your balance falls to the drawdown floor, the account fails. The floor is a dollar amount, and where it sits depends on the drawdown type:

• Static drawdown: the floor is fixed at starting balance minus the drawdown amount and never moves.
• Trailing drawdown: the floor sits a fixed amount below your highest balance, so it rises as you make new highs and never falls back.

Your cushion is the distance between your balance and the floor. Every losing trade eats into it, and the number of losses you can take is the cushion divided by your risk per trade.

Worked example. A $50,000 account with a $2,500 drawdown starts with a $2,500 cushion. Risking $250 per trade, the tenth straight loss reaches the floor, so you survive nine. Risking $500 per trade, the fifth loss reaches it, so you survive four. (Illustration only — not a recommendation.)

Losses to fail by risk per trade

The same $2,500 cushion lasts very different lengths depending on how much you risk on each trade:

$50,000 account, $2,500 drawdown, balance at the starting level. A loss that lands exactly on the floor counts as reaching it. Illustration only.

• Small risk buys time. At $100 per trade you survive 24 losses; at $1,000 only 2.
• Risk is a share of the cushion, not of the account. A 1% account risk of $500 is 20% of a $2,500 cushion — which is why prop accounts feel so much tighter than a normal 1% rule suggests.
• Losing streaks happen. Even good strategies lose several trades in a row, so size so that a normal streak does not end the account.

How the trailing floor moves

On a $50,000 account with a $2,500 trailing drawdown, here is where the floor sits as your highest balance grows, compared with a static drawdown:

Trailing “stops at start balance” means the floor rises with your highest balance until it reaches the starting balance, then stays there. Firms differ, so check yours. Illustration only.

Notice how a trailing floor takes back part of your cushion as you win: at a $52,500 high the floor has reached $50,000, so you hold $2,500 above it, never more. Locking in profit does not widen the gap.

Using the result well

• Start from the cushion, not the account size. Your real risk capacity is the distance to the floor.
• Turn dollar risk into contracts. Once you pick a risk per trade, use the futures position size calculator to find the contracts that fit your stop. The link beside the result pre-fills it.
• Check both limits. If you have a daily loss limit, the lower of the two limits is your real constraint.
• Re-run it after every winning day. On a trailing drawdown your floor and cushion change as your highest balance grows.

Frequently asked questions

How does a trailing drawdown work?

A trailing drawdown sets a floor a fixed dollar amount below your highest balance. As your balance makes new highs the floor rises with it, and it never moves back down. On a $50,000 account with a $2,500 trailing drawdown, a new high of $52,000 lifts the floor to $49,500. If your balance touches the floor, the account fails.

What is the difference between trailing and static drawdown?

A static drawdown keeps the floor at a fixed level (starting balance minus the drawdown amount) no matter how much you make. A trailing drawdown follows your highest balance up, so profits shrink your cushion unless the floor stops rising. Many firms stop the trail once the floor reaches the starting balance. The table above shows all three behaviors side by side.

How many losing trades can I take before failing an evaluation?

Divide your cushion (balance minus the drawdown floor) by your risk per trade. With a $2,500 cushion and $250 risk per trade, the tenth straight loss reaches the floor, so you survive nine. Smaller risk per trade means more losses survived. The calculator above does this for your own numbers and also shows the largest risk per trade that survives 5 or 10 straight losses.

How much should I risk per trade on a prop firm evaluation?

There is no single right answer, but risking a small slice of your cushion on each trade leaves room for normal losing streaks. As an illustration, risking 5% of a $2,500 cushion is $125 per trade, which takes 20 losses to reach the floor; risking 20% is $500, which takes just 5. Enter different values in the risk per trade field to see the trade-off, then size your contracts to that dollar risk.

What is a daily loss limit?

Many prop firms set a maximum amount you can lose in one day, separate from the overall drawdown. If you reach it, you may be locked out for the day or the account may fail, depending on the firm. Enter your limit in the calculator to see how many full-risk losing trades it allows. If that number is higher than the losses to the drawdown floor, the drawdown is your real limit.

Does the drawdown include open (unrealized) profit?

It depends on the firm. Some calculate the drawdown from your closing or end-of-day balance; others track it intraday and include open profit, so the floor can rise during a trade that later reverses. Check how your firm measures it, because it changes how much room you really have. This calculator works from the balance you enter.

Does this calculator use my prop firm's exact rules?

No. It is a generic calculator, and prop firm rules differ and change, including drawdown type, when the trail stops, daily limits and contract caps. Enter the numbers from your own account agreement. For background on how firms structure their rules, see our guide to prop firm rules for NinjaTrader automation.