Prop firm daily drawdown rules: how to never break them
Most failed evaluations are not failed on profit targets. They are failed on one bad afternoon that crosses a drawdown rule. Here is how the rules work and a plan to stay inside them.
Every firm writes its own rules and changes them over time. Always read your firm's current rules: this guide explains the common types, not any specific firm.
The three kinds of drawdown rules
Daily loss limit
The most you can lose in one trading day, measured from the start of the session. Breaking it usually means the day is over, and with some firms the account is failed. It often includes open positions: a floating loss counts even if you have not closed the trade.
Static maximum drawdown
A fixed floor below the starting balance, e.g. a $50,000 account with a $2,000 drawdown can never go below $48,000. The floor does not move.
Trailing maximum drawdown
The floor follows your highest balance (end of day or intraday, depending on the firm) up to a point. If you make $1,500 and give it back, you may have used almost the whole drawdown without ever going below your starting balance. This is the rule that surprises most traders.
A plan that keeps you inside
- Set your own daily limit below the firm's. If the firm allows $1,000, stop yourself at $600–$800. Slippage, a gap or an open trade must not be what decides whether you pass.
- Size every trade from the stop. With a fixed dollar risk per trade, you know exactly how many losers fit in your daily limit. See the position size calculator.
- Count open P&L. If the firm counts floating losses, your limit must too.
- Stop on good days as well. A daily profit target protects your trailing drawdown: every dollar given back after a peak eats into it.
- Reset at the firm's session time. For CME futures the day usually starts at 17:00 Chicago time (22:00 UTC in summer, 23:00 UTC in winter), not at midnight.
- Make it automatic. Rules you enforce yourself are the first to go when you are frustrated.
Example: $50,000 evaluation
Firm rules (example): daily loss $1,000, trailing drawdown $2,000. Your plan:
- Risk per trade: $200 (MES or MNQ, sized from the stop).
- Personal daily loss limit: $600 — three full losers.
- Daily profit target: $800 — stop and protect the trailing drawdown.
- Limits include open positions; trading blocked and account flat when one is hit.
On a bad day you lose $600 and keep $400 of margin to the firm's limit. On a good day you stop at +$800 instead of giving half of it back.
On Quantower: automate it with QT Risk Guard
QT Risk Guard, the risk plugin included with QT Risk Manager, enforces per account a per-session loss limit and profit target (open positions included), a trailing drawdown from the equity peak (intraday or end of day, optionally stopping at your starting balance), a maximum number of trades and your trading hours. When a rule is broken the account is locked in Quantower — no new orders from any panel — and flattened.
Every firm computes its trailing drawdown a little differently: set QT Risk Guard's levels slightly inside the firm's, use a custom formula if needed, and keep an eye on your firm's dashboard. The QT Risk Manager indicator sizes every trade from your stop, rounded down.
Related guides
Trading futures involves substantial risk of loss. This guide is educational and is not financial advice. QT Risk Manager is not affiliated with any prop firm. See the risk disclaimer.