Does Unrealized Profit Count Toward Drawdown in Prop Firms?
Drawdown rules are the #1 reason traders lose prop firm accounts. But there’s a crucial detail that trips up even experienced traders: Does your floating (unrealized) profit count toward your drawdown limit, or only closed trades? The answer isn’t universal — and the consequences can be severe.
What Is Drawdown — and Why Does Unrealized Profit Matter?
Drawdown is the maximum loss from the starting balance (or peak equity) you can incur before violating the firm’s risk rules. Prop firms typically enforce a maximum drawdown (e.g., 10% of your starting balance) and often a daily drawdown (e.g., 5% per day).
The key question: When a trade is open and in profit, does that profit increase your drawdown buffer? Or, if you’re up $3,000 on a $100,000 account but haven’t closed the trade, can you use that extra cushion to withstand a losing streak or larger open trades?
Why It Matters in Real Trading
- If unrealized profit counts: Your account 'breathes' as your equity grows, letting you risk more as you win.
- If it doesn't: Only closed profit increases your buffer. Floating P&L is ignored for drawdown calculations, meaning a big open win can vanish without ever protecting you from a violation.
How Top Prop Firms Handle Unrealized Profit in Drawdown Rules
Let’s compare how leading prop firms define drawdown and whether they count unrealized profit. This is not always spelled out in marketing materials but is buried in terms, FAQs, or support responses.
| Firm | Max Drawdown | Drawdown Type | Unrealized Profit Counted? | Profit Target | Daily Drawdown | Notes |
|---|---|---|---|---|---|---|
| FTMO | 10% | Equity & Balance | Yes | 10% | 5% | Drawdown calculated on both balance and equity. Floating profit increases buffer. |
| E8 Markets | 8% | Equity & Balance | Yes | 8% | 5% | Drawdown includes floating P&L. Unlimited trading period. |
| FundedNext | 10% | Equity & Balance | Yes | 10% | 5% | Both balance and floating equity used for drawdown checks. |
| The5ers | 6% | Balance Only | No | 6% | 3% | Only closed profit increases drawdown buffer. |
| Apex Trader Funding | 6% (Trailing) | Equity & Balance (Trailing) | Yes* | 6% | 0% | Trailing drawdown moves up with highest equity, includes floating P&L. |
| TopStep | 4% | Trailing Equity | Yes | 6% | 2% | Trailing drawdown based on equity (includes floating profit). |
| MyFundedFX | 8% | Equity & Balance | Yes | 8% | 5% | Equity drawdown: floating profit increases buffer. |
| Lux Trading Firm | 6% | Balance Only | No | 10% | 0% | Static drawdown: only closed profit counts. |
| City Traders Imperium | 10% | Balance Only (Static) | No | 10% | 5% | Static: Only balance, not floating, matters for drawdown. |
| Blue Guardian | 6% | Equity & Balance | Yes | 10% | 4% | Guardian Shield risk management uses both equity and balance. |
Quick Reference: Firms Where Unrealized Profit Does Count
- FTMO (10% max drawdown, 5% daily): Both balance and equity, so floating profit increases your buffer.
- E8 Markets (8%/5%): Drawdown is on equity as well as balance.
- FundedNext (10%/5%): Uses both balance and floating equity.
- MyFundedFX (8%/5%): Equity-based drawdown.
- Blue Guardian (6%/4%): Both equity and balance; Guardian Shield can close trades if loss is hit.
- Most futures firms (Apex, TopStep, Tradeify, etc.): Trailing drawdown is based on equity, so floating profit can help — but beware how the trailing feature works.
Firms Where Only Closed Profit Counts
- The5ers (6%/3%): Static drawdown, only closed trades count. Floating profit ignored.
- Lux Trading Firm (6%/0%): Static drawdown, closed profit only.
- City Traders Imperium (10%/5%): Static drawdown model.
Real-World Examples: How Unrealized Profit Affects Your Drawdown
Let’s walk through two scenarios with a $100,000 account and a 10% max drawdown ($10,000) — first at a firm where unrealized profit counts (FTMO), then at one where it doesn’t (The5ers).
Scenario 1: FTMO (Unrealized Profit Counts)
- Start: Balance and Equity = $100,000. Max drawdown = $90,000.
- You open trades and your floating equity rises to $105,000 (up $5,000, but not closed).
- Your new max drawdown is $95,000 (10% below current equity).
- You can lose $10,000 from this peak (to $95,000) without breaching rules — even if you haven't closed the profit.
In practice, you’re rewarded for growing your account, even with open trades.
Scenario 2: The5ers (Unrealized Profit Does Not Count)
- Start: Balance = $100,000. Max drawdown = $94,000 (6%).
- Your floating equity hits $110,000 (up $10,000, but not closed).
- Your drawdown limit is still $94,000 — it does not move until you close the trade.
- If your open profit reverses and you close a losing trade, you can hit the drawdown limit even though you were up $10,000 at one point.
This is a huge risk for swing traders or anyone holding through volatility.
Hidden Risks: What Traders Miss About Drawdown and Floating P&L
Trailing Drawdown: Why It’s Even Trickier
Some futures firms (e.g., Apex Trader Funding, TopStep, My Funded Futures) use trailing drawdown, which means your drawdown limit moves up with your highest equity — but can never go back down if you lose.
- If you hit a new equity high, the drawdown buffer increases.
- But if you have a big open win and then give it back, your buffer is now much tighter.
- This can create a "death spiral" where one big loss after a streak can instantly violate the rule.
For example, on a $100,000 Apex account (6% trailing drawdown), if your equity briefly hits $110,000, your trailing drawdown moves to $104,000. If you lose back to $104,000, you’re out — even though you never withdrew or closed the $10,000 profit.
Static vs. Trailing vs. Equity Drawdown: Know the Differences
- Static (balance-only): Only closed trades count. Your max loss is from your starting balance (or after closed profits).
- Trailing (equity or balance): Drawdown follows your highest equity (including floating P&L) and never moves back down.
- Equity-based (with daily drawdown): Both balance and floating equity count — but drawdown resets daily or is fixed relative to peak.
Which is best? Depends on your style:
- Swing traders and those who let winners run must have equity-based or trailing drawdown. Otherwise, you risk losing your account on reversals.
- Scalpers who close trades quickly are less affected — static drawdown may actually help, since you won’t "raise the bar" with floating equity spikes.
Firm-by-Firm: How Floating Profit Affects Your Actual Risk
Let’s compare some top firms, focusing on their drawdown mechanics and how floating profit is treated.
| Firm | Drawdown Type | Unrealized Profit Counted? | Max Drawdown | Profit Split | Best For |
|---|---|---|---|---|---|
| FTMO | Equity & Balance | Yes | 10% | 80/20 → 90/10 | Traders who scale into winners, swing traders |
| The5ers | Balance Only (Static) | No | 6% | 50/50 → 100% | Scalpers, instant funding seekers |
| MyFundedFX | Equity & Balance | Yes | 8% | 80/20 → 92.75% | Flexible, high-frequency traders |
| Lux Trading Firm | Balance Only (Static) | No | 6% | 80/20 | Conservative traders, large account seekers |
| Apex Trader Funding | Trailing Drawdown (Equity) | Yes | 6% | 100% first $25K → 90/10 | Futures traders, fast account scalers |
Hidden Trade-Offs: What the Marketing Doesn’t Tell You
- Lower drawdown % is not always safer: A 6% static drawdown (The5ers, Lux) can be much riskier than a 10% equity drawdown (FTMO) if you hold trades overnight or through news.
- Trailing drawdown can punish volatility: Firms like Apex or TopStep let floating profit count, but if you give back gains, the new drawdown floor remains — reducing your margin for error.
- Profit splits and scaling matter less if you can't survive: A 90/10 split is meaningless if a floating drawdown violation wipes you out before payout.
- Leverage interacts with drawdown rules: 1:100 leverage (FTMO, MyFundedFX) lets you build large positions, but without floating profit in your drawdown, this can backfire fast.
How to Choose the Right Drawdown Model for Your Trading
Ask Yourself:
- Do I regularly hold trades overnight or through news?
- Is my edge in letting winners run, or fast scalping?
- How comfortable am I with trailing drawdown — can I handle a buffer that only moves up, never down?
- Can I reliably close trades in profit before reversals, or do I need my floating P&L to count?
Action Steps
- Use the PropSurvivalEngine comparison tool to filter firms by drawdown type and see real user experiences.
- Test your strategy in a demo environment, specifically tracking drawdown rules (static vs. equity vs. trailing) before risking real capital.
- Consider a firm with equity-based drawdown (FTMO, E8 Markets, MyFundedFX) if you hold trades for more than a few minutes.
- Only choose static-drawdown firms (The5ers, Lux, CTI) if you’re a scalper or close trades quickly.
Bottom Line: Does Unrealized Profit Count Toward Drawdown in Prop Firms?
It depends on the firm — and the difference can make or break your prop trading career. At FTMO, E8 Markets, FundedNext, MyFundedFX, and most major futures firms, unrealized profit does count toward your drawdown buffer. This lets you scale into winners and avoid account-ending reversals — as long as you don’t give back gains before closing.
At The5ers, Lux Trading Firm, and City Traders Imperium, only closed trades count. Floating profit is invisible to the risk system: you can be up $10,000 and still lose your account if the market turns.
Trailing drawdown models (Apex, TopStep, My Funded Futures) add another twist: your buffer moves up with floating profit, but never back down. This rewards streaks but punishes reversals harshly.
Survival in prop trading isn’t about finding the loosest rules — it’s about matching the right drawdown model to your style. Don’t let a technicality wipe out your progress. Know your buffer, and trade accordingly.