FTMO Daily Drawdown: 3% (1-Step) vs 5% (2-Step) Rules Explained
FTMO's daily loss limit is calculated on EOD balance, not intraday peak — most traders get it wrong. Here's exactly how it works with real examples.
The FTMO daily drawdown limit is the single most common reason traders fail their funded accounts. But there's a critical detail most guides skip: FTMO has two challenge types with different daily drawdown limits — and the rules work differently depending on which one you're on.
This post covers both, with exact numbers and worked examples for each.
1-Step vs. 2-Step: Key Differences at a Glance
| Rule | 1-Step Challenge | 2-Step Challenge |
|---|---|---|
| Daily drawdown limit | 3% | 5% |
| Max drawdown limit | 10% | 10% |
| Drawdown type | EOD trailing (upward only) | Resets daily at midnight CET |
| Profit target | 10% | Phase 1: 10% / Phase 2: 5% |
| Time limit | None | Phase 1: 30 days / Phase 2: 60 days |
| Min trading days | Not specified | 4 days per phase |
The 1-Step is stricter on daily drawdown (3% vs 5%) but has no time pressure. The 2-Step gives you more daily room but locks you into a deadline.
1-Step Challenge: 3% Daily Drawdown
What the 3% limit means
Your maximum daily loss is 3% of your account balance, calculated from your end-of-day (EOD) balance the previous day. The limit trails upward — meaning as your balance grows, so does your absolute dollar limit.
| Account size | Max daily loss |
|---|---|
| $10,000 | $300 |
| $25,000 | $750 |
| $50,000 | $1,500 |
| $100,000 | $3,000 |
| $200,000 | $6,000 |
How EOD trailing works
This is where most traders get tripped up. Your daily limit is not fixed from your starting balance — it recalculates each day at 00:00 CE(S)T based on your balance at close of the previous day.
Example:
- Day 1 starting balance: $100,000 → daily limit: $3,000
- You make $5,000 on Day 1. EOD balance: $105,000
- Day 2 daily limit: $3,150 (3% of $105,000)
- You lose $2,000 on Day 2. EOD balance: $103,000
- Day 3 daily limit: $3,090 (3% of $103,000)
The limit only ever trails upward. Once your balance reaches a new high, that becomes the reference point. It never drops back down based on losses.
Why 3% is stricter than it sounds
On a $100,000 account, $3,000 is a tight daily budget for active traders. A single bad trade at 1–2% risk can consume most of your limit. Professionals on 1-Step accounts typically risk no more than 0.5–1% per trade and stop for the day after two consecutive losers.
2-Step Challenge: 5% Daily Drawdown
What the 5% limit means
Your maximum daily loss is 5% of your account balance, calculated from your balance at the start of each trading day (midnight CET). It resets fully every day — yesterday's losses don't carry over into today's limit calculation.
| Account size | Max daily loss |
|---|---|
| $10,000 | $500 |
| $25,000 | $1,250 |
| $50,000 | $2,500 |
| $100,000 | $5,000 |
| $200,000 | $10,000 |
Phase 1 vs. Phase 2: same drawdown rules
Both phases of the 2-Step apply identical drawdown rules: 5% daily, 10% maximum. The only things that change between phases are the profit target (10% → 5%) and the time limit (30 days → 60 days). Your risk management approach doesn't need to change between phases.
How FTMO Calculates Drawdown (Both Challenge Types)
Equity-based, not closed P&L
This applies to both the 1-Step and 2-Step. FTMO tracks your equity — the real-time value of your account including all open positions — not just your closed profit and loss.
What this means in practice:
- You're down $2,000 on closed trades today
- You have a $1,500 floating loss on an open position
- Your equity drawdown: $3,500 — already past the 3% limit on a $100k 1-Step account
The open position counts even though you haven't closed it. This catches traders who think they can "hold through" a loss without it affecting their daily limit.
The time zone trap
The daily reset happens at midnight CE(S)T — Central European (Summer) Time. This is not midnight in your local time zone.
| Your location | FTMO daily reset |
|---|---|
| London (BST) | 11:00 PM |
| New York (EST) | 6:00 PM |
| New York (EDT) | 5:00 PM |
| Los Angeles (PDT) | 2:00 PM |
| Tokyo (JST) | 7:00 AM |
New York traders: your daily limit resets in the afternoon, mid-session. You can use up your morning limit, hit the reset, and start fresh — all within what feels like the same trading day.
Daily vs. Maximum Drawdown
Both challenge types have two drawdown rules running simultaneously:
| 1-Step | 2-Step | |
|---|---|---|
| Daily limit | 3% (EOD trailing) | 5% (resets daily) |
| Maximum limit | 10% (trailing from highest EOD balance) | 10% (from initial balance) |
The maximum drawdown does not reset with the daily limit. On a $100,000 2-Step account, if you've lost $7,000 across multiple days, you only have $3,000 left before breaching the maximum — regardless of how good your daily limits look.
On the 1-Step, the maximum drawdown also trails upward from your highest EOD balance ever reached, and resets when a reward is withdrawn.
How to Manage Your Daily Drawdown
Know your floor before the first trade
Before placing any trade, calculate:
- What is my starting balance today?
- What is my daily limit (3% or 5%)?
- What is the absolute equity floor I cannot breach?
Write it down. Put it on your screen. This number is non-negotiable.
Use a hard stop at 70–80% of your limit
Professionals stop trading when they've used 70–80% of their daily limit. This gives a buffer for:
- Slippage on stop losses
- Floating losses on open positions
- Unexpected news spikes
1-Step example ($100k account): Daily limit = $3,000. Stop trading when down $2,100–$2,400.
2-Step example ($100k account): Daily limit = $5,000. Stop trading when down $3,500–$4,000.
Never trade into major news near your limit
If you're already at 60–70% of your daily limit and a Fed announcement or major economic release is approaching, close your positions. The volatility risk is not worth the potential breach.
Track equity, not just closed P&L
Most trading platforms show your closed P&L prominently and floating P&L in a separate column. FTMO measures equity. Make sure you're watching the right number — or use a drawdown calculator that tracks equity in real time.
Track your exact remaining budget with our Prop Firm Daily Drawdown Calculator.
The Best Day Rule (Both Challenge Types)
There is a third rule that applies alongside the drawdown limits — and most traders don't know it exists until they're flagged for it.
The Best Day Rule: Your single best trading day cannot exceed 50% of your total positive days' profit.
Example: You've made $800, $600, and $400 on three positive days — total positive profit: $1,800. Your best day was $800, which is 44% of $1,800. You're fine.
Now imagine you made $2,000 on one day and $400 on another — total positive: $2,400. Your best day ($2,000) is 83% of $2,400. That triggers the rule.
Important: Exceeding the Best Day Rule is not an automatic account breach. You are not terminated. But you must continue trading to bring the ratio back into balance — you cannot withdraw or complete the challenge while the rule is violated. It essentially forces you to keep trading rather than banking a single lucky day and stopping.
This rule exists to prevent traders from passing evaluations on one outsized win that doesn't reflect consistent skill.
What Happens If You Breach the Daily Limit?
Your account is immediately terminated. FTMO's risk management system closes all open positions and locks the account. There is:
- No warning
- No grace period
- No exceptions
You will receive an email notification. To continue, you must purchase a new challenge and restart from Phase 1.
Common Scenarios That Cause Breaches
Scenario 1: Revenge trading after early losses You lose $1,800 in the morning on a 1-Step account. You increase position size to recover. One bad trade later, you're down $3,200. Account terminated.
Scenario 2: Holding through news You're up $800, then hold through a major announcement. Price moves $1,000 against you in seconds. You're now down $200 with a floating loss that could spike further.
Scenario 3: Ignoring floating losses You have 3 open trades, each with a $800 floating loss. Your equity is already near the limit before you check your dashboard.
Scenario 4: Not knowing your reset time You're a New York trader on a 2-Step. You use $4,000 of your $5,000 daily limit by 4 PM EDT. The limit resets at 5 PM EDT. You trade aggressively after the reset — but the cumulative equity drawdown across the day still shows on your dashboard, and you misread it as fresh room.
Which Challenge Type Should You Choose?
1-Step suits traders who:
- Trade without time pressure and can take rest days
- Have consistent systems and don't need many days to hit a profit target
- Can manage tightly within a 3% daily budget
2-Step suits traders who:
- Prefer more daily room (5%) even with a deadline
- Want two evaluation phases to build discipline before going funded
- Are newer to prop firm trading and want the slower structure
Summary
| 1-Step | 2-Step | |
|---|---|---|
| Daily limit | 3% EOD trailing | 5% resets daily |
| Max drawdown | 10% trailing (resets to 90% on withdrawal) | 10% static from initial |
| Drawdown basis | Equity (includes open positions) | Equity (includes open positions) |
| Reset time | 00:00 CE(S)T | 00:00 CE(S)T |
| Best Day Rule | Max 50% of positive days' profit | Max 50% of positive days' profit |
| Breach result | Immediate termination | Immediate termination |
Whichever challenge you're on: know your floor before the first trade, stop at 70–80% of your limit, and always track equity — not just closed P&L.
→ Calculate your daily drawdown limit in real time
Compare FTMO With Other Prop Firms
Not sure if FTMO is the right fit? See how it stacks up against the alternatives:
- FTMO vs FundedNext — lower Phase 1 target and 15% evaluation profit share
- FTMO vs BrightFunded — better for crypto traders with 35 pairs and faster payouts
- FTMO vs E8 Markets — lower Phase 1 target and no minimum trading days