FTMO Drawdown Limits: How Daily & Max Loss is Calculated
Understand how FTMO drawdown limits are calculated. Learn the difference between daily balance and equity rules to protect your funded account.
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.