Drawdown types & the pre-purchase checklist

1. The drawdown types explained

The drawdown is the lowest your account is allowed to fall before the firm closes it. The type decides how that floor behaves:

Static (absolute) drawdown

A fixed floor based on your starting balance that never moves. Buy a $100k account with a 10% static drawdown and your floor is $90k — forever, no matter how high your balance climbs. The most forgiving and beginner-friendly model.

Trailing drawdown (end-of-day)

The floor rises with your closing balance each day, locking in gains overnight. More demanding than static, but manageable because it only updates once a day.

Trailing drawdown (intraday / peak equity)

The strictest type: the floor follows your highest equity during the day, including unrealised profit on open trades. A great morning can drag your bust level up to just below your current balance, leaving almost no room to give back. Common at some futures firms — respect it.

2. How drawdown is measured: balance vs equity

A second detail that trips people up: is the limit measured on balance (only closed trades count) or equity (open floating losses count too)? An equity-based limit can stop you out on an open drawdown that would have recovered. If you let trades breathe, favour a balance-based rule.

3. The pre-purchase checklist

Before you click buy on any challenge, confirm every one of these against your own strategy: