FTMO Drawdown Limits: How Daily & Max Loss is Calculated

Understanding the Drawdown Filter

Proprietary trading firms design strict daily loss and max loss rules to filter out emotional gamblers and find disciplined risk managers. Breaking a drawdown limit is the single most common reason why traders blow their evaluation accounts.

To protect your challenge, you must understand exactly how drawdown is calculated.

Daily Drawdown vs. Maximum Drawdown

Most prop challenges (such as FTMO) enforce two distinct drawdown limits:

1. Daily Drawdown Limit (e.g., 5%)

This is a dynamic limit that resets every day at a specific broker server time (usually midnight CE(S)T).

The Rule: The equity or balance of your account must not drop below 5% of your starting balance of that specific day.
The Catch: If you end a day in profit, your daily limit for the next day shifts upward. If you end the day in drawdown, your limit remains bound to your start-of-day balance.

2. Maximum Overall Drawdown Limit (e.g., 10%)

This is a fixed limit bound to your initial starting balance.

The Rule: Your account equity or balance must never drop below 10% of the initial account size.
Example: On a $100,000 account, your equity must never drop below $90,000 at any point during your challenge.

How to Protect Your Drawdown

To ensure you never break these limits, integrate a dynamic risk plan:

Reduce Size in Drawdown: If your account drops by 2%, cut your risk per trade by 50% (from 1.0% risk to 0.5% risk).
Use a Hard Daily Stop: Configure your charting or execution software to disable trading once you reach 60% of your daily limit (e.g., stop trading at 3% loss instead of waiting for the 5% breach).
Avoid Overnight Hold Risk: Unless your challenge allows swing trading, close all positions before session closes to avoid broker rollover spread expansions.

Frequently Asked Questions

FAQ

FTMO Drawdown FAQ

Common questions about how FTMO calculates and enforces its daily and maximum loss limits.

How is the FTMO daily loss limit calculated?

FTMO calculates the daily loss limit (5%) from the higher of your balance or equity at the daily reset (00:00 CE(S)T). Your equity must never drop more than 5% below that reference during the day. Because it is measured on equity, open floating losses count in real time — you can breach before closing a trade.

Does FTMO use static or trailing drawdown?

FTMO uses a static maximum drawdown of 10%, fixed to your initial starting balance. On a $100,000 account the hard floor is $90,000 and it never moves, even as you make profit. This lets disciplined traders build a buffer, unlike trailing-drawdown models where the floor follows your equity highs.

What time does the FTMO daily drawdown reset?

The daily limit resets at 00:00 CE(S)T, which is roughly 6:00 PM New York time. Any trade held across that reset belongs to the new day’s allowance, so a position opened in the US afternoon session is already counted against the next day.

Do floating (open) losses count toward FTMO drawdown?

Yes. FTMO measures both the daily and maximum drawdown against live equity, so unrealized losses on open positions reduce your allowance instantly. If equity touches the limit for even a moment, the account is breached — even if the trade would have recovered.

What happens if I breach an FTMO drawdown limit?

The breach is automatic and final. FTMO’s risk system enforces the limit programmatically, so touching the daily or maximum floor by any amount terminates the evaluation or funded account with no warning. This is why keeping a buffer below the hard limit is essential.