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Maximum drawdown is the largest decline from an account’s previous peak to a later trough before a new peak is reached. Traders use it to measure how severe a losing period became. Prop firms also use maximum-loss limits as hard account rules, but those rules are not always calculated the same way as the performance statistic.
Reviewed 17 September 2026 against the current MyFundedCapital plan comparison and help centre. Program rules can change, so check the live rule for your exact account before trading or requesting a payout.
Maximum drawdown: the short answer
If an account reaches a $110,000 peak and later falls to $99,000, the peak-to-trough loss is $11,000. The maximum drawdown for that period is 10%:
Maximum drawdown % = (peak value − trough value) ÷ peak value × 100
This historical statistic answers “how far did the account fall from its high?” A prop-firm maximum-drawdown rule answers a different question: “what account floor must not be breached right now?” That floor may be static, trailing, balance-based, equity-based, end-of-day or intraday.
How to calculate maximum drawdown
- Build the equity curve. Use the same inputs the rule or analysis requires, including realised profit and loss, open P/L, commissions and swaps where applicable.
- Track each running peak. A new high replaces the previous peak.
- Measure every later decline. Subtract the trough from the relevant peak.
- Convert it to a percentage. Divide the decline by the peak and multiply by 100.
- Keep the worst result. That is the maximum drawdown for the selected period.
Worked example
| Point | Account value | Running peak | Drawdown from peak |
|---|---|---|---|
| Start | $100,000 | $100,000 | 0% |
| New high | $108,000 | $108,000 | 0% |
| Pullback | $102,600 | $108,000 | 5% |
| Deeper trough | $97,200 | $108,000 | 10% |
| Recovery | $110,000 | $110,000 | 0% |
The largest decline was $10,800 from $108,000 to $97,200, so the maximum drawdown was 10%. A prop account could still breach earlier if its contractual floor, daily-loss rule or equity calculation was tighter than this retrospective statistic.
Maximum drawdown versus daily loss
A maximum-loss rule controls the total decline permitted over the life of the account. A daily-loss rule limits the damage within one trading day or reset period. Both can apply at the same time, and the tighter remaining cushion controls the next trade.
Suppose the maximum floor leaves $4,000 of room but the current daily-loss floor leaves only $1,200. The practical risk budget is not $4,000; it is less than $1,200 after allowing for fees, slippage and open positions. Use the lot size calculator to translate that smaller cash-risk allowance into position size.
Static, trailing, balance and equity rules
Static maximum drawdown
A static floor stays anchored to a defined reference balance. On a $100,000 account with a 10% static maximum loss, a simple floor is $90,000 unless the program states a different calculation. Profits increase the cushion because the floor does not follow the account upward.
Trailing maximum drawdown
A trailing floor rises after the account makes progress and normally does not move back down. Some programs trail end-of-day closed balance, others intraday balance or equity, and some stop trailing at a lock point. Read the dedicated trailing drawdown guide before treating two rules with the same headline percentage as equivalent.
Balance-based versus equity-based
A balance calculation generally moves after trades close. An equity calculation can include unrealised profit and loss while positions remain open. Equity-based rules can therefore breach during a trade even when the closed balance still looks safe.
End-of-day versus intraday
An end-of-day rule updates its reference at a specified session close. An intraday rule can react to a new high or loss in real time. The reset time, timezone and treatment of open positions are part of the rule—not implementation details to ignore.
Current MyFundedCapital drawdown models
MFC does not use one universal “10% maximum drawdown” rule. The model depends on the selected program. The live plan comparison currently shows:
| Program | Maximum drawdown | Daily loss | What to verify |
|---|---|---|---|
| Instant Funding | Starts at 6%; tightens to 5% after +5% profit | 3% | The current floor, consistency rule and post-payout cushion |
| 1-Step Challenge | 10% trailing | 5% | The closed-balance trailing calculation and lock point |
| 2-Step Challenge | 10% static | 5% | The static floor and profitable-day requirements |
| Prediction Market | 6% trailing equity | 3% of previous end-of-day equity | The equity high-water mark and contract-specific mechanics |
These percentages are not interchangeable. A 10% trailing rule can become tighter after profits, while a 10% static floor stays fixed. Instant Funding starts with a smaller cushion and then tightens after growth. Compare the exact formula, not only the largest advertised percentage.
How a payout can affect drawdown
A payout reduces funds available in the account. Do not assume that a daily or maximum floor resets or moves down by the withdrawn amount. MFC’s current Accounts & Payouts FAQ advises traders to check the displayed post-payout limits and leave room for open risk, fees and adjustments. Ask support to confirm the effect for the specific account if the dashboard is unclear.
Before requesting a payout, record the current balance, equity, daily floor, maximum floor and proposed withdrawal. Then model the remaining cushion. Payout eligibility and payout timing are separate from whether the remaining account can safely support the strategy.
How to manage maximum drawdown
- Risk from the tighter cushion. Compare the daily and overall floors before every session.
- Include all open risk. Correlated positions can behave like one oversized trade.
- Set a personal stop above the firm limit. A buffer allows for slippage, spreads, commissions and mistakes.
- Reduce risk after a losing streak. Fixed percentage sizing can still compound damage when several setups are correlated.
- Replay the exact rule in backtests. A strategy tested only on closed trades may hide an intraday equity breach.
- Recalculate after payouts and scaling events. Never assume the old cushion survived unchanged.
For a broader operating process, use the risk-management checklist and define daily stop, position-size, correlation and review rules before the session begins.
Frequently asked questions
What is a good maximum drawdown?
There is no universal percentage. A good result is one that remains comfortably inside the applicable account rules across representative market conditions. Compare the strategy’s historical and intraday drawdown with the actual daily and maximum floors, then keep a safety buffer.
Does maximum drawdown include open trades?
A performance report may use closed or mark-to-market equity depending on its methodology. A prop-firm rule may explicitly use balance or equity. Confirm the definition; do not infer it from the phrase “maximum drawdown.”
Can profits increase my drawdown cushion?
With a static floor, profits usually increase the distance to the floor. With a trailing rule, the floor may follow the account upward, so the usable cushion can remain similar or even tighten around payouts.
What happens if the maximum floor is breached?
A hard breach can close or fail the account and remove payout eligibility under the applicable terms. Stop trading before the contractual floor, not exactly at it.
Is maximum drawdown the same as risk per trade?
No. Risk per trade is the planned loss on one position. Maximum drawdown measures or limits the cumulative decline across trades. Position sizing is one tool for keeping the cumulative decline under control.
Bottom line: calculate peak-to-trough drawdown for strategy analysis, but manage a funded account from its live contractual floors. Check whether the rule is static or trailing, balance or equity, end-of-day or intraday, and recalculate the cushion after every meaningful balance change.
This article is educational and is not financial or investment advice. MFC funded accounts are simulated accounts using real market quotes unless the applicable terms expressly state otherwise. Trading involves substantial risk of loss.
