Almost every prop firm evaluation gets summarized in a sentence like "max 10% drawdown" — and almost every trader who's had an account blown by that exact rule will tell you the sentence was less simple than it sounded. Max drawdown isn't one universal calculation. It's a specific formula, and the version your prop firm uses changes what's actually safe to risk.
The two competing definitions
The first version, often called static or "absolute" max drawdown, sets a single floor calculated once, at the start: if your account size is $100,000 and the rule is 10%, your floor is $90,000, permanently, no matter how high your balance climbs afterward. Grow the account to $115,000 and your floor is still $90,000 — the drawdown allowance doesn't shrink as you profit, and it doesn't grow either.
The second version, trailing max drawdown, recalculates the floor relative to your highest balance ever reached (the "high-water mark"), not your starting balance. Grow that same $100,000 account to $115,000 under a 10% trailing rule, and your floor moves up to $103,500 — 10% below your new peak. This version punishes giving back profits, not just losing from the start, and it's the version that quietly blows more funded accounts than any other single rule, because traders check it against their starting balance out of habit when they should be checking it against their peak.
Why this distinction actually matters for position sizing
Under a static rule, a trader who's up 15% has exactly as much room to lose as they did on day one — the allowance never moves. Under a trailing rule, that same trader has less room than when they started, because every dollar of unrealized or realized profit raises the floor along with it. Sizing your risk the same way under both rules is a mistake that's easy to make and expensive to discover — usually at the exact moment a string of losses eats into gains you thought you had locked in.
This is the exact reason mysetuplap's Account setup asks for maxDrawdown as an explicit dollar figure tied to a static floor anchored at account creation, computed against the lowest balance the account has actually touched — not recalculated silently against a moving peak you'd have to track by hand. The evaluation logic (evaluateBreach, if you're the type who wants to see the actual computation) walks every trade in order, tracks the running balance and the lowest point it reached, and flags a breach the instant that floor is crossed — the same math, every time, regardless of how the balance moved to get there.
Max drawdown vs daily drawdown — a different rule entirely
The other place traders miscalculate is conflating max drawdown with daily drawdown, which is a completely separate limit with its own math (worth its own detailed breakdown) — max drawdown is the total allowance across the life of the account; daily drawdown resets every day and measures loss from that single day's starting balance. An account can be nowhere near its max drawdown floor and still get blown the same afternoon by a daily drawdown breach, because the two limits are independent and both have to hold at once.
DD Used: the number that actually matters minute to minute
Rather than the raw dollar floor, the number worth watching in real time is DD Used — the percentage of your total allowance you've already spent. An account with a $10,000 static allowance that's currently $3,000 into drawdown has used 30% of its total risk budget, not "$3,000 down" — and that percentage is what should actually drive whether you take the next trade at full size, half size, or not at all. A trader managing dollars instead of DD Used percentage tends to size identically whether they're at 5% of their allowance or 85% of it, which is precisely backwards.
This is why the Prop Firms & Accounts summary in mysetuplap surfaces DD Used as a live percentage against the account's specific floor — computed the same evaluateBreach way behind every account, whether it's Phase 1, Phase 2 or already Funded — instead of leaving you to do that division in your head under pressure, at the exact moment you're least equipped to do arithmetic carefully.
The habit that actually prevents the blow-up
Before you accept any prop firm's terms, read the drawdown clause twice and identify, specifically, whether it's static or trailing — the words to look for are usually "based on starting balance" (static) versus "based on highest balance reached" or "trailing" (trailing). Then size every single trade against your current DD Used percentage, not your account balance and not your starting capital. The traders who survive evaluations aren't the ones who never have a losing streak — they're the ones whose position size already accounts for exactly how much drawdown allowance a losing streak would cost them, before it happens, not after.
