Why you need to know the exact rules
Every prop firm has its own drawdown rules, and the differences can be the reason you pass or fail an evaluation. A trader who operates comfortably within FTMO’s limits could violate The Funded Trader’s rules without realizing it, simply because the percentages are different.
In this article, you’ll find a detailed and up-to-date comparison of the drawdown rules of the most popular prop firms, with explanations of each drawdown type and tips for choosing the right firm based on your trading style.
Quick comparison table
| Prop Firm | Max DD | Daily DD | DD Type | Phases |
|---|---|---|---|---|
| FTMO | 10% | 5% | Fixed | 2 |
| Funded Next | 10% | 5% | Fixed | 2 |
| The Funded Trader | 8% | 5% | Fixed | 2 |
| MyFundedFX | 12% | 5% | Fixed | 1-2 |
| True Forex Funds | 8% | 5% | Fixed | 2 |
| E8 Funding | 8% | 5% | Fixed / Trailing | 1-2 |
Note: Rules change frequently. Always verify on each prop firm’s official page before starting an evaluation.
Drawdown types explained
Before analyzing each firm, make sure you understand the three main types. If you need a refresher on the exact formulas, check our guide on how to calculate drawdown.
Maximum drawdown (fixed)
This is the total loss limit from the highest point of your equity. If your account started at $100,000 and the max drawdown is 10%, your equity can never fall below $90,000.
The key point: this limit is relative to the peak, not the initial balance. If your equity rises to $105,000 and then falls to $94,500, your drawdown is 10% of the $105,000, not of the $100,000.
Daily drawdown
This measures the maximum decline within a single trading day. It’s calculated from the equity at the start of the day (or the balance at the previous day’s close, depending on the firm).
This is the rule that eliminates the most traders, because it’s easy to lose 5% on a volatile day without realizing it. If you don’t know exactly what your equity was at the start of the day, you can’t know how much margin you have left.
Trailing drawdown (floating)
Trailing drawdown is the most dangerous. The limit “moves” upward with your equity. If you started with $100,000 and the trailing DD is 8%, your floor starts at $92,000. But if your equity rises to $106,000, the new floor rises to $98,000.
The trap: once the floor rises, it never comes down. If you had an excellent day where your equity reached $110,000 and then you lost, your floor stayed at $102,000 permanently.
Detailed analysis by prop firm
FTMO
The most well-known and the market reference.
- Maximum drawdown: 10% (fixed relative to peak)
- Daily drawdown: 5% (based on previous day’s balance or current day’s equity, whichever is higher)
- Type: Fixed (not trailing)
- Evaluation phases: 2 (Challenge + Verification)
- Timeframe: 30 days (Challenge), 60 days (Verification)
The good: Clear and consistent rules. Non-trailing drawdown gives you more flexibility. Excellent reputation and reliable payouts.
Watch out for: FTMO’s daily drawdown calculation uses the higher value between the balance and equity at the start of the day. This means if you have open positions with profit at the start of the day, that profit counts toward the daily drawdown calculation.
Funded Next
Popular for its competitive prices and favorable conditions.
- Maximum drawdown: 10% (fixed)
- Daily drawdown: 5%
- Type: Fixed
- Evaluation phases: 2 (Evaluation + Verification)
- Timeframe: No time limit
The good: No time limit to complete phases. This reduces the pressure of having to trade aggressively to meet the profit target within a short timeframe.
Watch out for: Although the rules are similar to FTMO, always verify how they calculate the start of the trading day, as it can vary by server.
The Funded Trader
Stricter drawdown, but with flexible options.
- Maximum drawdown: 8%
- Daily drawdown: 5%
- Type: Fixed
- Evaluation phases: 2
The good: Variety of account types and challenges. Good customer support.
Watch out for: With only 8% max drawdown, you have less margin than FTMO or MyFundedFX. If your strategy has historical drawdowns of 6-7%, you’re operating very close to the limit. A bad streak of 2-3 days could eliminate you.
MyFundedFX
The most generous drawdown in the market.
- Maximum drawdown: 12%
- Daily drawdown: 5%
- Type: Fixed
- Evaluation phases: 1 or 2 (depending on the program)
The good: 12% max drawdown is significantly more generous than most. Ideal for strategies with higher volatility or traders who need more breathing room.
Watch out for: The daily drawdown is still 5%, same as everyone else. The extra margin only applies to the maximum accumulated drawdown.
True Forex Funds
Strict but with good reputation.
- Maximum drawdown: 8%
- Daily drawdown: 5%
- Type: Fixed
- Evaluation phases: 2
The good: Transparent evaluation process. Good payout conditions.
Watch out for: Like The Funded Trader, the 8% max drawdown requires more conservative risk management. Not ideal for swing trading strategies that hold positions during high-volatility events.
E8 Funding
Option with trailing drawdown in some programs.
- Maximum drawdown: 8% (can be trailing in certain programs)
- Daily drawdown: 5%
- Type: Fixed or Trailing (depending on program)
- Evaluation phases: 1 or 2
The good: Single-phase evaluation option, which speeds up the process.
Watch out for: The trailing drawdown program is particularly dangerous. If your equity rises quickly at the start and then pulls back, the trailing floor could leave you with very little margin. Check our guide on common drawdown mistakes to avoid the trailing DD traps.
How to choose a prop firm based on your trading style
If you’re a scalper
Best option: FTMO or Funded Next (10% DD, clear rules)
Scalpers generally have low drawdowns because each trade lasts a short time. The 10% margin is more than sufficient. What’s critical is daily drawdown: if you make many trades in a day, a bad streak can accumulate losses quickly.
If you’re a swing trader
Best option: MyFundedFX (12% DD) or FTMO (10% DD)
Swing traders hold positions for days and are exposed to gaps and overnight volatility. You need the largest margin possible. Avoid prop firms with 8% max DD and definitely avoid trailing DD.
If you use Expert Advisors (EAs)
Best option: MyFundedFX (12% DD) with per-strategy monitoring
EAs can generate unpredictable drawdowns, especially during unusual market events. Besides choosing a firm with generous margin, you need to monitor drawdown for each individual EA. A strategy with 5% drawdown might not seem serious, but if you have three EAs and all enter drawdown simultaneously, your total drawdown can spike.
Trading Monitor calculates drawdown by magic number, letting you see exactly which strategy is causing problems before it affects the account limit.
If you’re just starting
Best option: Funded Next (no time limit) or FTMO (for documentation and community)
Time pressure is a new trader’s worst enemy. Funded Next lets you take all the time you need, reducing the temptation to overtrade.
Daily drawdown: the rule everyone underestimates
Of the two drawdown rules, the 5% daily drawdown is the one that eliminates the most traders. The reason is simple: 5% in a single day seems like a lot, but in practice, it’s reached faster than you think.
Consider a $100,000 account:
- Your daily limit is $5,000
- If you trade 2 lots in EUR/USD, each pip is worth $20
- You only need 250 pips against you to breach the limit
- On a volatile day (major news, NFP, central bank decisions), 250 pips of movement is perfectly normal
The solution: set up automatic alerts. A system that notifies you when your daily drawdown reaches 3% gives you time to react before the 5%.
Monitor your drawdown in real time
Knowing the rules is the first step. Actively monitoring them is what separates traders who keep their accounts from those who lose them.
With Trading Monitor, you can:
- See your max and daily drawdown updated every 60 seconds
- Receive alerts at 70%, 85%, and 95% of the limit
- Monitor multiple accounts from different prop firms simultaneously
- Track drawdown by strategy if you use EAs
Don’t settle for checking your drawdown at the end of the day. By the time you do, it could be too late.
Try the free drawdown calculator to verify your current situation, or create a free account for automated monitoring.