Glossary · Risk and drawdown
Maximum loss limit
- Also called
- max overall drawdown
- max drawdown
- maximum drawdown
- max loss
What it means
In a prop firm, the maximum loss limit (max overall drawdown) is the floor the account equity must never touch. It is the main control on how much simulated loss a single account can generate, and it defines what kind of trader the program suits.
There are three common designs. A static limit is fixed at a level below the starting balance and never moves. A trailing limit rises as the account's peak balance or equity rises. An end-of-day limit trails too, but updates only at the daily close. Many futures programs stop trailing once the limit reaches the starting balance.
Whatever the design, the site should state the level in dollars as well as percent for every account size.
Related terms
Read these next.
Static drawdown
Trailing drawdown
End-of-day drawdown
Daily loss limit
Risk engine
On your website
Where this shows up on a prop firm site.
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