Drawdown Calculation Formula for Prop Firms 2026
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Drawdown Calculation Formula for Prop Firms
The drawdown calculation formula tells you the exact balance you cannot fall below. Get it wrong by a few hundred dollars and you breach an account you thought was safe. Get it right and you always know your floor before you place a trade.
There are two formulas, because there are two kinds of drawdown. Use the wrong one and your math is dangerous.
The static drawdown formula
A static drawdown is fixed from your starting balance. The formula never changes:
Quick Calculator
Use the interactive calculator below to run your own numbers instantly.
Drawdown Calculator
Floor = Starting balance − Max drawdown
Start with $50,000 and a $2,500 max drawdown, and your floor is $47,500 for the entire evaluation. Make $5,000, give back $4,000, you're still fine, because $47,500 is the only number that matters and it never moves.
This is the formula you want. One calculation, done once, true forever. You can let a trade run without recalculating anything.
The trailing drawdown formula
A trailing drawdown follows your highest balance, so the floor is a moving target:
Floor = Highest balance reached − Max drawdown
Start with $50,000 and a $2,500 trailing drawdown. Floor begins at $47,500. Make $3,000, peak balance is now $53,000, and your floor recalculates to $53,000 − $2,500 = $50,500.
Notice what happened: your floor is now above your starting balance. You can be up $500 on the account overall and still breach, because the floor trailed up and never comes back down. Our trailing drawdown guide shows how this catches profitable traders.
The variable that breaks the formula: balance vs equity
Both formulas need one input you must confirm, what counts as your "balance."
Closed-balance trailing uses only banked profit. The floor moves when you close a winning trade.
Equity trailing uses your highest unrealized balance, intraday. Float $1,800 in open profit and the floor jumps as if you'd booked it, then a normal pullback breaches you on a trade that's still green.
Same formula, very different risk. Always check which your firm uses before trusting your own calculation.
Worked example: side by side
You start at $50,000 with a $2,500 drawdown. You make $3,000, then give back $2,800.
Identical trading. One account survives, one is closed. The only difference is which formula the firm applies.
How TradersYard keeps the math simple
TradersYard uses a static drawdown, so your formula is one subtraction you do once. Starting balance minus the max drawdown gives a floor that never trails your equity or your peak. No intraday surprises, no recalculating after every winning trade.
Entry starts at £31 with a 14-day money-back guarantee, and the drawdown rules are stated plainly. Start your evaluation. For a step-by-step walkthrough, see how to calculate max drawdown. The CME publishes contract specifications if you trade futures and need precise tick values for your math.
Frequently Asked Questions
How do you calculate drawdown for a prop firm? +
For a static account, subtract the max drawdown from your starting balance, and that fixed figure is your floor. For a trailing account, subtract the max drawdown from your highest balance reached, which means the floor moves up as you profit.
What is the formula for max drawdown? +
Floor equals starting balance minus max drawdown (static), or highest balance reached minus max drawdown (trailing). The trailing version recalculates every time you set a new peak, so your floor rises with your gains.
Why does my drawdown floor keep moving? +
Because you're on a trailing drawdown. It follows your highest balance upward and locks in, so each new peak raises the floor you can't fall below. A static drawdown doesn't move.
Is drawdown calculated on balance or equity? +
It depends on the firm. Closed-balance drawdown only updates when you bank profit. Equity drawdown updates on unrealized intraday highs, which is riskier. Confirm which your firm uses before relying on your calculation.
What's the safest drawdown type for beginners? +
A static drawdown calculated on closed balance. It's one fixed number you can't accidentally miscalculate as your account moves. TradersYard uses a static drawdown.
Trade a simple static drawdown, from £31
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