What Is Static Drawdown?
Static drawdown is a maximum loss limit that stays fixed at one level for the life of your prop firm account. It's calculated once from your starting balance, and it doesn't move when your profits go up or down. Most prop firm challenges also have a daily loss limit. Commonly that's around 5% a day and 10% in total, but the numbers differ from firm to firm, so always check the rules of the challenge you're buying.
Static drawdown is a maximum loss limit fixed at a set dollar level, calculated from your starting balance. It does not rise when you make profits, so your breach level stays the same for the life of the account.
How Static Drawdown Works
Take a $100,000 account with a 10% static drawdown:
- Breach level: $90,000 (starting balance minus $10,000)
- If you grow the account to $108,000: the breach level is still $90,000
- Your real buffer at that point: $18,000, not $10,000
Your max loss limit never changes. What changes is your buffer, the distance between your balance and the breach level. Every dollar of profit adds to that buffer, and every dollar of loss shrinks it. The floor itself stays where it is.
Static vs. Trailing Drawdown
The difference shows up when you're in profit.
| Static Drawdown | Trailing Drawdown | |
|---|---|---|
| Breach level | Fixed from starting balance | Follows your highest balance or equity |
| After profits | Buffer grows | Buffer stays the same size |
| Example ($100K, 10%) | Floor stays at $90,000 | Floor rises to $98,000 after reaching $108,000 |
| Main risk | Large single losses | Giving back open profit |
With a trailing drawdown, the floor rises as your peak balance or equity rises, so a good run pulls the floor up behind you. Some firms stop the floor once it reaches your starting balance, but not all do. A static drawdown never does this, which is why many traders prefer it for swing or multi-day strategies.
- •Static drawdown fixes your breach level at the start. Profits increase your buffer instead of moving the floor up with your wins.
- •It's not a guarantee of safety. Many firms also have a daily loss limit, for example 5% ($5,000 on a $100K account) in one day, and that can end your account long before the max loss does.
- •Next step: before you buy a challenge, find out whether the drawdown is based on balance or equity, and whether it is static or trailing.
Balance-Based or Equity-Based?
"Static" tells you the floor doesn't move. It doesn't tell you what is measured against that floor.
- Balance-based: Only closed (realized) trades count toward the limit.
- Equity-based: The limit is checked against your account's real-time equity, so both realized and unrealized (floating) profits and losses from open trades count.
On an equity-based rule, a trade that dips sharply against you can breach the account even if you would have closed it at breakeven. This matters most on volatile instruments like gold (XAUUSD) and index futures like NQ, where a few minutes of movement can swing your equity by thousands.
How to Size Risk Around a Static Drawdown
Your buffer is simply your current balance minus the breach level. Work from that number:
- Know your real buffer. On a fresh $100K account with a 10% static drawdown, that's $10,000.
- Set per-trade risk as a fraction of it. Risking 0.5% to 1% of the account per trade means a long losing streak has to be very long before it reaches the maximum loss limit.
- Respect the daily limit first. If your firm has a daily loss limit, it is usually the tighter constraint. Size your trades around it, not around the max loss.
- Cut size after losses, not after wins. The buffer is smallest right after a drawdown, so that's when risk should shrink.
Don't treat the buffer as a risk budget. It's a safety margin.
Static drawdown can create a false sense of safety. Traders who build a big buffer often increase their size, and one oversized trade or a news spike can then wipe out weeks of progress. Also check how your firm handles open positions, floating losses, and fees, since these can count toward the limit and trigger a breach faster than you expect.
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