Absolute Drawdown — also known as Static Drawdown or Fixed Drawdown — is the maximum amount your account is allowed to lose from its initial balance.
This type of drawdown is used in CTI funding programs:
✅ 2-Step Challenge = 10% of Initial Balance.
✅ Instant Funding = 6% of Initial Balance.
✅ Instant Funding Pro = 6% of Initial Balance.
In these programs, your drawdown limit never moves, no matter how much profit you make. That’s why it’s called “static.”
🔷 Do We Use Balance or Equity for Drawdown?
This is where it’s important to be clear:
We measure the drawdown limit based on your initial balance (not equity).
But your trades will be closed and your account will be stopped out if your equity (balance + floating losses) drops below the maximum allowed loss level.
So even though we use your balance to set the drawdown limit, your open (floating) losses do count toward your stop-out condition.
Stop Out Level = Current Account Balance + Floating Losses
🔷 Quick Definitions:
Balance = Your account value from closed trades only.
Equity = Balance +/- floating profits or losses from open trades.
Max Absolute Drawdown (MAD) = Fixed loss from the starting balance.
Stop Out Level (SOL) = Starting Balance - MAD
(This is where your account is closed if equity falls below it.)
🔷 How Is the Max Absolute Drawdown Calculated?
Let's suppose MAD = 10%, then
Max Absolute Drawdown (MAD): 10% x Initial Balance
Stopout Level (SOL): Initial Balance - MAD
Example: If your starting balance is $100,000:
MAD = $100,000 x 10% = $10,000
SOL = $100,000 - $10,000 = $90,000
If your equity (including floating losses) reaches $90,000 or below, your account will violate this rule, even if you haven’t closed those losing trades yet.
This is a risk control rule that all prop firms use to protect the account from blowing up.
⚠️ Common Misunderstanding ⚠️
Some traders think that because it’s “balance-based,” they can keep losing trades open forever and only get stopped out if closed losses push the balance below the limit.
❌ That’s not correct.
✅ Floating losses do count as they affect your equity, and if your equity drops below the max loss allowed, your account will be stopped out even with trades still open.
This measure is in place to prevent losing more than 10% on the account.
💡Want to learn about Drawdowns in prop trading? 💡
Check out this insightful blog post: What is Drawdown in Prop Trading?