Maximum drawdown

A maximum drawdown is the absolute floor your account balance may never fall below, measured across the whole lifespan of the account rather than a single day. Once equity touches the maximum drawdown level, the account is breached for good — there is no daily reset to save you.

Maximum drawdown comes in two main flavours. A static (or "end-of-day") maximum drawdown is a fixed dollar floor that never moves, while a trailing drawdown rises with your profits. For example, a $50,000 account with a $2,500 static maximum drawdown can never drop below $47,500, no matter how much profit you bank along the way.

Because it is the hardest limit on the account, the maximum drawdown defines your true risk capacity. Confusing it with the daily drawdown is a classic beginner mistake: the daily limit resets each session, whereas the maximum limit is cumulative and unforgiving.