# What is Maximum loss limit?

> A maximum loss limit is the total drawdown a prop firm account may reach before it is closed, set as a static, trailing or end-of-day level below the starting balance.

- Source: https://pipvalley.com/glossary/maximum-loss-limit
- Publisher: PipValley - web design studio for prop trading firms
- Updated: 2026-10-03

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.

## Why it matters

The maximum loss design shapes pass rates, trader behavior and your liability more than almost any other parameter. It is also the rule traders misunderstand most when it trails. Explain the design with a chart or a worked example, and make sure the dashboard shows the current breach level, not just the starting one.