Definition
What is Max drawdown?
Max drawdown (maximum loss limit) is the largest total loss an account may reach, measured from the initial balance or the equity peak, before the account is closed.
Where the daily drawdown protects one session, the max drawdown protects the whole life of the account. It is the floor your equity must never touch, no matter how many days it takes to get there.
Prop firms calculate it in one of two ways. A static max drawdown is a fixed floor below the initial balance. A trailing max drawdown follows the highest equity the account has reached, so the floor rises as you make money.
The limit is usually a percentage of the initial balance, not of the current balance. On a trailing model, the distance between the peak and the floor stays the same; only its position moves.
Because the max drawdown takes weeks to reach with small risk, breaching it is almost always the result of oversized trades or of trying to win back losses quickly.
Example
Example: a $10,000 account with an 8% trailing max drawdown allows $800 of loss from the equity peak. If equity peaks at $10,500, the floor is $9,700; if it never rises above $10,000, the floor stays at $9,200.
At a prop firm
At Axora Funded every max loss is trailing on equity and never locks: 8% on the 2-Step, 6% on the 1-Step, 5% on Ascent, Pass and Bolt, 4% on Spark and 3% on Elite. Once a payout is approved, the floor can never be below the initial balance.
Frequently asked questions
Is max drawdown the same as daily drawdown?
No. The daily limit resets every day; the max drawdown applies to the whole life of the account.
Does max drawdown include open trades?
At Axora Funded, yes: the limit is checked on equity, so floating losses count in real time.