Most traders understand that FTMO has drawdown limits. Far fewer understand exactly how they're calculated — and that misunderstanding is one of the most expensive mistakes a prop firm trader can make.
This article explains both limits precisely, how they interact, and the practical trading decisions that follow from understanding them correctly.
The Two Drawdown Rules You're Being Judged On
FTMO's evaluation uses two separate drawdown rules simultaneously. Violating either one ends your challenge.
Maximum Daily Loss (Session Drawdown)
Limit: 5% of initial account balance
What it measures: The maximum loss allowed in a single trading day — from the highest point your equity reaches that day to its lowest point.
Critical detail most traders miss: The daily loss limit is calculated from your equity peak that day, not from the opening balance. If you have open profits in the morning and give them back, those count against your daily limit.
Example with a $100,000 account:
- Your account opens at $100,000
- You open a winning position — equity rises to $101,500
- Your daily loss limit now calculates from $101,500
- Equity cannot fall below $96,500 (5% of $101,500 below the peak)
This catches traders off guard constantly. They think they have 5% of $100,000 = $5,000 to lose. In reality, if they had open profits earlier in the day, their effective buffer is tighter than they realize.
Maximum Drawdown (Overall Limit)
Limit: 10% of initial account balance
What it measures: The maximum total drawdown allowed across the entire evaluation period.
Key detail: This is calculated from the initial account balance, not a floating high-water mark. The floor never moves upward as you make profit — it stays fixed at 90% of your starting balance.
Example with a $100,000 account:
- Initial balance: $100,000
- Your equity can never fall below $90,000
- It doesn't matter how much you made before the drawdown
- This floor is fixed from day one of your evaluation
Where Traders Get Confused
The daily loss limit is the more dangerous of the two because of how it interacts with open positions.
Many traders calculate their risk based on their balance — the closed P&L. But FTMO calculates the daily loss limit based on equity — which includes open floating P&L.
This means: if you have a position that's currently up $2,000, and you then open another trade that starts losing, your drawdown clock is already ticking from that $2,000 equity peak — not from your balance.
Daily room remaining = $5,000 − $1,800 = $3,200 — not $5,000
A trader with a $100,000 account who has $2,000 in floating profit has an effective daily loss buffer of only $3,000 in additional equity decline before hitting the 5% limit — not $5,000.
The Practical Rules That Follow
Rule 1: Calculate risk from equity, not balance
Before every new trade, check your current equity — not your balance. Use the formula above. Your real daily loss room changes throughout the session as your equity moves.
Rule 2: Set your own session limit well inside the FTMO limit
Experienced prop traders don't treat the 5% limit as their working limit. They set a personal session stop at 2–3%.
Why? Because reaching the FTMO limit and being disqualified requires losing exactly to the limit with no buffer. If your personal limit is 2.5%, a bad day ends at −2.5% and your account survives. The 5% rule becomes a backstop you never need to think about.
Rule 3: Know your absolute floor at all times
Your absolute equity floor is simple:
Every session, check how far above this floor you currently sit. That number tells you how much total runway you have remaining across the entire evaluation.
How Both Limits Interact Under Pressure
Here's a scenario that shows how both limits create pressure simultaneously:
You're on day 8 of your FTMO $100K challenge. Your account is at $94,500 after a difficult week — a $5,500 total drawdown so far.
- Your max drawdown floor: $90,000. You have $4,500 left.
- Your daily loss limit: 5% from today's equity peak.
If you have a bad day and lose $4,600, you've violated the maximum drawdown rule — even though you haven't hit the 5% daily limit yet. The 10% overall limit triggered first. As your overall drawdown accumulates, your effective trading room shrinks even when your per-session limits haven't changed.
Apex, TopStep, and Other Firms: Key Differences
FTMO's rules are the most commonly referenced, but the major prop firms differ in important ways:
| Firm | Daily Limit | Max Drawdown | Key Difference |
|---|---|---|---|
| FTMO | 5% of balance | 10% of initial balance (fixed floor) | Fixed floor — doesn't move |
| Apex | Varies by account | Trailing from equity peak | Floor rises as you profit — more restrictive |
| TopStep | 2% (stricter) | Fixed overall limit | Tighter daily limit than FTMO |
| The5%ers | Proportional per level | Adjusts as account scales | Progressive — limits change at each scaling step |
The common thread: all of them have both a daily loss limit and an overall drawdown limit, and both can end your challenge independently.
The Summary: Numbers That Matter
For a $100,000 FTMO Challenge:
| Rule | Limit | Your Floor |
|---|---|---|
| Daily Loss | 5% of balance | Moves — calculated from today's equity peak |
| Max Drawdown | 10% of initial balance | $90,000 — fixed forever |
Know these numbers. Know which one you're closer to at any given moment. And build your session risk management around limits you set yourself — well inside the FTMO thresholds — rather than trading to the edge of what's allowed.
The traders who pass challenges consistently aren't the ones who trade closest to the limits. They're the ones who never need to think about the limits at all.
Cruveno monitors your Session DD and Equity DD simultaneously against your FTMO, Apex, or TopStep rules — and auto-closes positions the moment a threshold is breached. Pre-built templates for all major prop firms.
Get started — €19/month →