FTMO Drawdown Rules Explained 2026: Daily Loss, Maximum Loss, and What Happens to Overnight Positions

Most FTMO evaluations aren't lost to a bad trading idea. They're lost to a misunderstood number. A trader opens a position they believe is well within their risk tolerance, checks their account balance, sees plenty of room and gets an account-breach notification anyway. The trade wasn't reckless. The math on drawdown just wasn't what they assumed it was.

FTMO's drawdown rules are two separate mechanics working together, not one simple percentage. Get the distinction right, and overnight and swing positions become entirely manageable. Get it wrong, and an otherwise profitable strategy can end an evaluation in a single session. This guide walks through exactly how FTMO calculates daily loss and maximum loss, what that means for holding positions overnight, and how it compares with other drawdown models used across the prop trading industry based on FTMO's own published Trading Objectives as of 2026.

How FTMO Calculates Maximum Daily Loss

What is FTMO's daily loss limit and how is it recalculated each trading day?

FTMO's Maximum Daily Loss is fixed at 5% of the relevant starting balance on the 2-Step Challenge (3% on the 1-Step Challenge), and it resets every trading day at 00:00 CE(S)T. According to FTMO's own Trading Objectives documentation, the daily floor is calculated from the higher of the account balance or equity at the start of that day, minus the Daily Loss Amount.

That detail matters more than it looks. If a trader's balance sits at $100,000 but they're holding an open position with $2,000 in floating profit at midnight, the daily floor for that new trading day is calculated from $102,000 not the $100,000 balance. The daily loss allowance moves with whichever figure is higher at the reset point, then holds fixed for the rest of that day.

Why do open positions count against the daily loss limit before you close the trade?

The daily loss rule is checked against equity, not balance. Equity includes the account balance plus the profit or loss on any currently open positions, along with swaps and commissions. This means a floating loss on a trade that hasn't been closed yet can trigger a breach just as easily as a realized loss on a closed one.

This is the single most common way FTMO evaluations end unexpectedly. A trader watching their account balance sees a number that hasn't moved, while their equity—the number that actually governs the rule—has already dropped closer to the floor because of an open position moving against them. Traders who track only their closed-trade P&L, rather than live equity, are the ones most likely to be caught off guard by this rule.

How FTMO's Maximum Overall Loss Limit Works

What's the difference between a static and a trailing Maximum Loss Limit at FTMO?

FTMO's Maximum Loss Limit sets an overall floor for the account equity can never drop below this level regardless of how the daily rule behaves. The mechanics of that floor differ meaningfully depending on which Challenge type a trader is on:

On the 2-Step model, the floor never moves. A $100,000 account has a permanent $90,000 floor from day one, and that floor doesn't rise even as the balance grows, which means profits build a larger cushion over time rather than shrinking the safety margin.

On the 1-Step model, the floor can only move upward, never down, as balances reach new daily highs. It's a more dynamic version of the same 10% rule, and it rewards steady account growth with a rising safety floor, but it also means a large single-day gain followed by a pullback the next day can tighten the available room faster than a static floor would.

How does the Maximum Loss Limit differ between the 1-Step and 2-Step Challenge?

Beyond the static-versus-recalculated distinction, the two paths carry different daily loss percentages (3% on the 1-Step versus 5% on the 2-Step) and different starting profit splits, which changes how aggressively a trader might reasonably need to trade to hit targets within their risk budget. A trader choosing between the two isn't just picking an evaluation format—they're picking which drawdown philosophy they want to operate under for the life of the account, assuming they pass and continue trading on the funded stage.

This is also where FTMO resets the clock entirely: once a Reward (profit withdrawal) is processed and a new FTMO Account is issued, the Maximum Loss Limit returns to its original starting point—90% of Initial Simulated Capital—rather than carrying forward any accumulated cushion from the prior account cycle.

Overnight and Weekend Position Rules

Can you hold positions overnight on an FTMO account without breaching drawdown rules?

Yes. FTMO permits overnight and weekend holding on both Challenge types, and there is no rule against carrying a position through a session close. The constraint isn't whether you're allowed to hold overnight—it's whether the position's potential overnight movement fits inside the daily loss room that remains at that moment, and whether it fits inside the overall Maximum Loss floor.

A position that looks safely sized during a calm session can carry meaningfully more overnight risk once low-liquidity hours, gaps at market open, or unexpected news are factored in. FTMO's rules don't distinguish between an overnight loss and an intraday one—equity is equity, whether the price move happened at 2pm or 2am.

How does an unrealized overnight loss interact with the next day's recalculated floor?

Because the daily floor recalculates at 00:00 CE(S)T from the higher of balance or equity, an open position carried overnight effectively gets "re-anchored" into the next day's starting point. If that position is sitting at a floating loss when the clock resets, the new day's floor is calculated from the lower, already-reduced equity figure, meaning less daily loss room is available for that next session than there would have been if the position had been closed the day before at breakeven.

This is a detail that catches traders who think of drawdown in daily silos. In practice, an overnight position links two trading days together: how it performs going into the reset directly shapes how much room exists on the other side of it.

Static vs. Trailing Drawdown: How FTMO Compares Across the Prop Firm Industry

How does FTMO's static overall-loss model compare with firms using end-of-day trailing drawdown, such as The5ers?

FTMO's 2-Step static Maximum Loss and The5ers' drawdown structure represent two different philosophies that are worth understanding side by side, since both are widely used across the industry and each suits a different kind of trader.

The5ers, one of the more established firms in the space (operating since 2016), uses an end-of-day (EOD) drawdown approach on several of its programs: rather than the loss floor being fixed permanently at the start like FTMO's 2-Step, or recalculating from an intraday equity peak, The5ers' drawdown limit for the next trading session is generally set based on the account's balance at the end of the current session. This is a meaningfully trader-friendly detail—it means the drawdown floor for the day ahead is anchored to where the account actually closed, rather than to an intraday high the account briefly touched before giving some of it back.

Where FTMO's static 2-Step floor rewards long-term profit accumulation with an ever-growing cushion against a permanently fixed line, The5ers' EOD approach rewards traders for how the account finished the day, which can be more forgiving for traders who see some intraday volatility but manage to close a session in a reasonable position. Across its programs, The5ers also layers in required visible stop-losses and structured evaluation paths (Bootcamp, Hyper Growth, High Stakes) that scale differently, so its drawdown mechanics are best understood alongside its scaling model—a trader's available cushion tends to grow as the account itself scales up through profit milestones, not just as a function of the drawdown rule in isolation.

Neither structure is objectively safer in every scenario. FTMO's static model is simple and highly predictable: the floor never moves, full stop, which some traders find easier to plan around long-term. The5ers' EOD model ties the day-ahead floor to the prior session's close, which can better reflect a trader's actual realized performance rather than a snapshot from months earlier.

For traders comparing firms on drawdown philosophy alone, the more useful question isn't "which firm has the bigger number"—both commonly operate in a similar 10%-ish overall risk band—but "which recalculation method matches how I actually trade and close out my sessions."

Why does the choice between static and trailing drawdown matter more for swing traders than for day traders?

A trader who closes every position before the end of the session rarely interacts with the mechanics of an EOD or daily-recalculated floor, since their equity and balance are effectively the same number at the reset point. For swing and overnight traders, though, the recalculation method is one of the most important variables in the entire rule set.

A static floor (like FTMO's 2-Step) gives a swing trader a fixed, permanent reference point they can plan every overnight hold against for the life of the account—useful for traders who want one number to remember and never have to recheck.

An EOD-anchored floor (closer to The5ers' approach) instead asks a swing trader to think about where the account will likely close before carrying a position overnight, since that closing figure becomes the reference point for the next session's risk budget. Traders who prefer simplicity often gravitate toward static models; traders who actively manage session-by-session risk sometimes prefer an EOD structure because it more closely reflects genuine day-to-day account performance.

Worked Example: How a Single Overnight Position Interacts With Both Rules

Numbers are easier to apply once walked through together. Consider a $100,000 FTMO 2-Step account with a $100,000 balance at the start of the day and no other open positions.

Two things stand out.

First, the open position's floating loss immediately reduces the remaining daily room from $5,000 down to $3,000, well before the trade is closed. The account never touched balance, but equity already moved.

Second, because the daily floor recalculates from balance (not equity) at the reset point in this simplified example, the next day's floor doesn't automatically get worse just because a position is floating at a loss going into midnight. But if that same position had instead pushed the account's balance down—for instance, if a portion had been closed at a loss before the reset—the next day's floor would be recalculated from that lower balance, genuinely tightening the room available for the following session.

This is the mechanical detail that trips up traders who assume "my balance is fine, so I'm fine." The daily rule is watching equity in real time regardless of what balance shows, and the next day's starting point depends on exactly which figure and which moment the reset captures.

Common Drawdown Mistakes That End FTMO Evaluations

Why do traders misjudge how much daily loss room they actually have left?

The most frequent mistake is tracking account balance instead of equity. Balance only updates when a trade closes; equity updates continuously with every tick against an open position.

A trader who mentally calculates "I'm down $500 today" based on their last closed trade, while an open position is quietly floating at another $1,500 in unrealized loss, is actually $2,000 into their daily allowance—not $500—and has far less room left than they believe.

A related mistake is forgetting that the daily floor is set from the higher of balance or equity at the reset point, not simply the prior day's closing balance. A trader who had an open profitable position at midnight, then watched it reverse into a loss the next morning, may find their floor was set higher than expected, tightening the room available for that session in a way that isn't obvious just from glancing at yesterday's closing number.

How do swap fees and commissions quietly push accounts toward a breach?

Equity calculations include swaps and commissions, not just raw price movement. A large position held overnight across several sessions accumulates swap costs that erode the account incrementally, even if the underlying trade thesis is unchanged.

Traders sizing a position purely on expected price movement, without factoring in the accumulated cost of holding it, can find their real daily loss room shrinking faster than the price action alone would suggest—particularly on higher-leverage positions held across multiple nights.

Building a Risk Plan Around FTMO's Drawdown Rules

How should you size overnight positions to stay safely inside the daily loss limit?

A workable approach starts from the loss limit, not from the position. Before entering an overnight hold, calculate the worst reasonable adverse move for that instrument (accounting for typical overnight volatility, not just the current session's range), and confirm that the resulting equity impact—including swaps—stays comfortably inside whatever daily loss room remains after the day's reset.

Traders who size positions this way, rather than sizing first and checking the rule afterward, are far less likely to be surprised by a breach triggered by an open position rather than a closed loss.

It also helps to build in a buffer rather than sizing to the exact edge of the daily allowance. Since the next day's floor is influenced by where the account sits at the 00:00 CE(S)T reset, leaving genuine room rather than using the full daily allowance right up to the boundary protects against the floor tightening unfavorably if an overnight position is still open and moving at the reset moment.

What role does the consistency rule play alongside drawdown limits in long-term account survival?

Drawdown limits control how much can be lost; consistency requirements (used by FTMO and several other firms, including as part of certain scaling frameworks) control how evenly profits are distributed across trading days, discouraging a strategy built around one outsized session carrying an entire evaluation.

Together, the two rule types push toward the same underlying goal: a trading approach that survives repeatedly, rather than one that happens to clear a single evaluation through a lucky high-variance outcome.

For traders building a long-term plan—whether on FTMO, The5ers, or any other funded account—treating drawdown limits and consistency rules as a single combined risk framework, rather than two separate boxes to check, tends to produce account survival rates that hold up better once real funded capital and payout expectations are on the line.

Summary

FTMO's drawdown system runs on two connected rules: a Maximum Daily Loss that resets each day based on the higher of balance or equity, and a Maximum Loss Limit that is either permanently static (2-Step) or recalculates upward with new balance highs (1-Step).

Both are checked against live equity, meaning open positions—including those held overnight—count against the limit before they're ever closed. Firms across the industry, including The5ers with its end-of-day drawdown approach, structure this recalculation differently, so understanding exactly which model an account operates under is one of the most practical steps a trader can take before carrying a position through a session close.

Sizing overnight risk from the loss limit backward, rather than checking the rule only after a position is already open, is the habit that separates traders who survive an evaluation from those who don't.

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