Most traders don’t fail because of bad strategy
Here’s a fact that surprises many: most traders who fail prop firm evaluations don’t do so because their strategy is bad. They fail because they make avoidable drawdown management mistakes.
We’ve identified the 5 most common mistakes that cause account elimination at prop firms. The good news is that all of them are preventable if you know what to look for.
Mistake 1: Not monitoring drawdown in real time
The problem
Many traders check their drawdown at the end of the day, at the end of the week, or worse, only when they “feel” something is wrong. They use spreadsheets, do mental calculations, or simply trust their gut.
The result: by the time they realize they’re near the limit, they’ve already breached it.
Real example
A trader operates with FTMO, $100,000 account, 5% daily drawdown limit ($5,000). It’s Friday, NFP (Non-Farm Payrolls) day. The trader has three open positions from the previous day with floating profit of +$1,200.
The NFP report comes out worse than expected. In 15 minutes, his three positions go from +$1,200 to -$4,800. The trader is in a meeting and doesn’t see his platform. Half an hour later, the loss reaches -$5,300.
Daily drawdown: 5.3%. Account eliminated.
If he had an automatic alert at 3% daily drawdown, he could have closed positions in time.
How to avoid it
- Set up automatic alerts at 50%, 70%, and 90% of your drawdown limit
- Don’t rely on mental math during active trading sessions
- Use a tool that syncs your account frequently (every minute, not every hour)
- Trading Monitor alerts you in real time before you breach the limit
Mistake 2: Not understanding the difference between max drawdown and daily drawdown
The problem
Many traders focus only on maximum drawdown (10% at FTMO) and forget that daily drawdown (5%) is a separate, independent rule. They’re two different limits and breaching either one eliminates you.
Real example
A trader has a $50,000 account at FTMO. His equity has grown to $54,000 over the past two weeks. He feels confident.
On a Monday, the market opens with a strong gap against his swing positions. In a single day, he loses $3,200.
Maximum drawdown: ($54,000 - $50,800) / $54,000 = 5.93% — within the 10% limit.
Daily drawdown: ($54,000 - $50,800) / $54,000 = 5.93% — breaches the 5% limit.
The trader looks at his max drawdown, sees 5.93% and thinks “I’m fine, I have up to 10%.” But he’s already lost the account due to daily drawdown.
How to avoid it
- Monitor BOTH drawdowns separately, not just the maximum
- Calculate your daily drawdown at the start of each session: what’s my equity now? How much can I lose today?
- Remember that daily drawdown resets each day, but one bad day is enough to eliminate you
- Review the specific rules of your prop firm to understand exactly how they calculate the start of the day
Mistake 3: Ignoring strategy drawdown
The problem
If you use multiple Expert Advisors (EAs) or strategies with magic numbers in MetaTrader, your total drawdown is the sum of all strategies. The danger is that one strategy can be losing heavily while another wins, and the total drawdown looks acceptable… until it doesn’t.
Real example
A trader uses three EAs on a $100,000 account:
- Trend EA (magic 1001): Accumulated profit +$4,500
- Range EA (magic 1002): Accumulated profit +$2,800
- News EA (magic 1003): Accumulated profit -$3,200
Total account drawdown: ($100,000 + $4,100 - $100,000) doesn’t seem worrying. Total equity is $104,100.
But let’s look at drawdown by strategy:
- Trend EA: peak profit $6,200, current $4,500 — DD = 27.4%
- Range EA: peak profit $3,100, current $2,800 — DD = 9.7%
- News EA: peak profit $1,500, current -$3,200 — DD = 313% (in net loss)
The News EA is completely out of control. If the Trend EA also enters drawdown, the account will plummet quickly because the other two EAs no longer compensate.
Two days later, the Trend EA loses $3,000 in a pullback. Now total equity falls to $101,100 and the account drawdown spikes suddenly.
How to avoid it
- Monitor each strategy’s drawdown individually, not just the total
- Set internal drawdown limits per strategy: if an EA reaches -X% drawdown, disable it
- If you can’t monitor by magic number manually, use a tool that does it automatically
- Trading Monitor breaks down drawdown by magic number, showing you exactly which strategy is in trouble
To learn how to calculate strategy drawdown correctly, check our drawdown calculation guide.
Mistake 4: Not excluding deposits and withdrawals from calculations
The problem
When you deposit money into your account, equity rises. When you withdraw, it drops. If you include these movements in your drawdown calculation, you get completely distorted numbers that don’t reflect your real trading performance.
Real example
A trader has an account with equity of $48,000. Peak equity was $50,000.
Real drawdown: ($50,000 - $48,000) / $50,000 = 4%
The trader deposits $10,000. Equity rises to $58,000.
If they calculate drawdown incorrectly including the deposit:
“False” drawdown: ($58,000 - $58,000) / $58,000 = 0%
The trader thinks their drawdown “reset” to 0%. They relax their risk management and trade with larger size. But prop firms DON’T include deposits in the calculation. Their real drawdown is still 4%.
The reverse scenario is also dangerous. If a trader withdraws $5,000 from an account with equity of $52,000 (peak: $55,000):
Real drawdown: ($55,000 - $52,000) / $55,000 = 5.45% Drawdown with withdrawal: ($55,000 - $47,000) / $55,000 = 14.5% — INCORRECT
The withdrawal artificially inflated the drawdown. The trader panics and makes unnecessary emotional decisions.
How to avoid it
- Always exclude deposits and withdrawals from drawdown calculations
- Use tools that make this exclusion automatically
- If you calculate manually, keep a separate record of deposits and withdrawals and subtract them from equity before calculating
- Trading Monitor’s free drawdown calculator lets you enter deposits and withdrawals for a precise calculation
Mistake 5: Not having alerts configured
The problem
This is the simplest mistake and the most devastating. Many traders know how to calculate their drawdown, understand the rules, monitor their strategies… but they don’t have an alert system that warns them when they’re approaching the limit.
The reason alerts are indispensable is psychological: when you’re in the middle of a losing streak, your judgment gets clouded. You start thinking “this trade will recover everything” and take increasingly bigger risks. Without an external alert forcing you to stop, it’s easy to cross the limit without realizing it.
Real example
A trader operates with The Funded Trader, $200,000 account, 8% max drawdown ($16,000). He’s had a bad week with accumulated drawdown of 5.5% ($11,000).
On Friday, he decides to “recover” some losses. He doubles his position sizes. The first two trades go well and he recovers $2,000. Encouraged, he opens an even larger position.
The market moves against him. In 20 minutes, he loses an additional $7,500. His total drawdown: 5.5% + (($7,500 - $2,000) / $200,000) = 8.25%. Account eliminated.
If he had an alert at 6% (75% of the limit), the alert would have triggered after the first losing streak of the week. He’d have a day or two to calm down, analyze the situation, and rationally decide whether to keep trading or stop.
How to avoid it
- Configure at least three alert levels:
- Level 1 (Caution): at 50% of the drawdown limit
- Level 2 (Warning): at 75% of the limit
- Level 3 (Critical): at 90% of the limit
- Define action rules for each level: at Level 1 reduce size, at Level 2 stop opening new positions, at Level 3 close everything
- Set up alerts for both maximum drawdown and daily drawdown
- Use push alerts on your phone, not just notifications on the trading platform
The cost of these mistakes
Let’s do the math. A typical FTMO evaluation costs between $155 and $1,080 depending on account size. If you lose the evaluation due to an avoidable drawdown mistake and have to pay again:
| Account Size | Evaluation Cost | 3 Failed Attempts |
|---|---|---|
| $10,000 | ~$155 | $465 |
| $25,000 | ~$250 | $750 |
| $50,000 | ~$345 | $1,035 |
| $100,000 | ~$540 | $1,620 |
| $200,000 | ~$1,080 | $3,240 |
Three failed attempts on a $100,000 account is $1,620. That’s money you could have saved with a monitoring system that costs a fraction of that.
And that’s without counting the opportunity cost: time wasted, emotional frustration, and lost confidence.
Action plan: protect your next evaluation
Here’s a practical checklist for your next prop firm evaluation:
Before starting
- Know the exact rules of your prop firm: max drawdown, daily drawdown, how they calculate the start of the day. Check our prop firm comparison.
- Calculate your historical drawdown using your trading history. If your historical drawdown is above 60% of the prop firm’s limit, your strategy is too aggressive.
- Set up alerts at 50%, 75%, and 90% of each drawdown limit.
During the evaluation
- Check your drawdown at the start of each session: how much margin do I have left today?
- Don’t double down after losses. Aggressive “recovery” is the number one cause of elimination.
- If you receive a Level 2 alert (75% of the limit), stop trading for the day. Period.
Recommended tools
- Use the drawdown calculator for quick verifications
- Set up Trading Monitor for automatic monitoring every 60 seconds
- Keep a separate trading journal where you record your emotional state, not just the numbers
Don’t be the trader who finds out too late
Drawdown mistakes are the most expensive mistakes in prop firm trading. Not because they’re complicated to understand, but because they’re easy to make when you don’t have the right tools.
The difference between a trader who fails three evaluations in a row and one who passes on the first try isn’t always the strategy. Many times it’s simply that one had alerts configured and the other didn’t.
Create your free account and set up your alerts before your next evaluation starts. It’s the cheapest investment you can make to protect your capital.