What is a maximum loss limit?

Two common forms:

• Static: a fixed floor under the starting balance for the life of the account.
• Trailing: a floor that rises with the account's peak equity.

The static form is simpler to explain and never punishes a trader for being in profit. A trailing form tightens as the account grows.

PropExecutor treats these as two separate rules. Its maximum loss limit is static from the starting balance: 6% of a $1,000 account is a floor of $940 for the account's whole life. Firms that want a floor that follows the account up add the separate trailing drawdown rule.

Worked example

On a $25,000 account with an 8% maximum loss, the static floor is $23,000. If the account grows to $27,000 and then falls to $23,500, it is still alive, because the floor never moved. A trailing version would have raised the floor as the account grew.

Choosing a percentage

Many firms set the maximum loss at about twice the daily limit, so a trader cannot hit the overall floor in a single day.