Drawdown Limit

A drawdown limit is the maximum loss an account may take before it is closed or suspended — a rule imposed by a prop firm, not a market mechanic. Two details decide how strict it really is. Whether it measures balance or equity: an equity-based limit counts unrealised losses, so an open position that dips can breach it before you have lost anything realised. And whether it is static or trailing: a trailing limit follows your highest balance upward, which means profits raise the floor and a normal retracement after a good week can end the account.