Glossary · Prop-firm trading
Maximum loss
The most an account may ever be below its starting size. Crossing it ends the account; it does not reset.
Commonly 6% to 12% of the initial account size. A static maximum loss is a floor fixed at the start: on a 100,000 account with a 10% rule the floor is 90,000 for the life of the account, whatever profits are made above it.
A trailing maximum loss follows the account's high-water mark instead, so it climbs as the account climbs and never comes back down. Which kind a programme uses is the line most worth reading in its rules.
Worked example
A 100,000 account with a 10% static maximum loss has a floor at 90,000 for life. After a good month the balance is 108,000; the floor is still 90,000, so the account may lose 18,000 before it ends. With a 10% trailing rule instead, the floor would have climbed to 98,000 - or locked at 100,000 if the firm stops it at the starting balance.
- Also called
- maximum drawdown, overall drawdown, max total drawdown