Max drawdown as a statistic#
How do you calculate max drawdown?
Max drawdown = (peak − lowest point after that peak) ÷ peak. You look at every fall from a high to a later low and keep the deepest one.
An account that grows from $10,000 to $12,000 and then dips to $9,000 has a max drawdown of 25% ($3,000 ÷ $12,000). It ended only 10% below where it started, but the deepest dip along the way was 25%.
What is the difference between drawdown and max drawdown?
A drawdown is any single fall from a peak. The max drawdown is the deepest of them over a period. As a statistic it looks backward: it describes how bumpy a strategy has been.
Max drawdown as a prop firm rule#
At a prop firm the same phrase looks forward. It is set as a floor: a balance your equity must stay above.
The design question is whether the floor is static (fixed below the starting balance) or trailing (rising with new highs; see trailing drawdown). Some firms also add a separate daily limit; Fullport does not.
Also check what the floor is measured against. Equity means cash plus the current value of open positions. Balance means closed trades only.
Fullport's max drawdown by account#
One rule for all three accounts: the drawdown amount D is 4% of the starting balance as a fixed dollar figure, not 4% of the current balance. The floor opens at start minus D, rises only when a UTC day closes at a new high, and locks at breakeven once a day closes D above the start (see breakeven lock).
| Account | Drawdown amount (D) | Floor: opening → once locked |
|---|---|---|
| $25,000 | $1,000 | $24,000 → $25,000 |
| $50,000 | $2,000 | $48,000 → $50,000 |
| $125,000 | $5,000 | $120,000 → $125,000 |
Swipe or scroll to compare all columns.
The floor is measured against live equity, open positions included, on every price tick of anything you hold.
How to use max drawdown to size trades#
The useful number is not the balance but the gap between equity and floor. On a fresh $25,000 account that gap is $1,000.
A memecoin position that can fall 50% before you exit puts half its size at risk, so a $500 position uses about a quarter of that gap. Size from the gap with the position size calculator, and re-measure it after every close.
Prop traders coming from forex or futures will recognise the floor but not the extras: Fullport has no daily drawdown, no time limit, one evaluation step, and a market that trades 24/7. The rules page walks the floor day by day, and the drawdown rules explainer compares designs.
Quick answers
- What is the difference between drawdown and max drawdown?
- A drawdown is any decline from a peak to a later low. Max drawdown is the deepest of those declines over a period, or, at a prop firm, the overall loss limit an account's equity must stay above.
- How is maximum drawdown calculated?
- Take the highest value before a fall, subtract the lowest value reached afterwards, and divide by that high. An account that peaks at $12,000 and later bottoms at $9,000 has a maximum drawdown of $3,000, or 25%.
- Is max drawdown measured on balance or equity?
- It depends on the firm, so read the rules. At Fullport the floor only ratchets from the realized balance at the UTC day close, while the floor itself is measured against live equity, including open positions.
- What is the difference between max drawdown and trailing drawdown?
- Max drawdown is the overall loss limit. A trailing drawdown is one way of setting it, where the floor rises as your balance makes new highs. Fullport's max drawdown is a 4% trailing floor that locks at breakeven.