The short version
| Margin | Drawdown | |
|---|---|---|
| What it is | Money your open trades lock up | Money you've lost from a starting point |
| Do you get it back? | Yes, when the trade closes | Only by making it back |
| What drives it | Lot size, price and leverage | Lot size and how far price moves against you |
| Typical prop firm rule | Some firms cap margin usage, for example at 80% | Daily loss limit and maximum loss limit |
| When to check it | Before you open a trade | All day, especially with trades open |
Margin: money on hold
When you open a trade, the platform sets part of your account aside as margin. You haven't lost it. It's a deposit that comes back when the position closes. What margin limits is how much you can have open at once, and at firms with a margin rule, how much of the account your trades may lock up. We cover the maths in how to calculate margin usage.
Drawdown: money gone
Drawdown is how far your account has fallen from a reference point. Prop firms usually set two limits:
- Daily loss limit: how much you may lose in one trading day, often measured from the balance or equity at the start of the day.
- Maximum loss: how far the account may fall in total. It can be static, fixed from the starting balance, or trailing, following your highest balance or equity upward.
Common numbers are around 5% daily and 10% overall, but check your own account. Many firms count open losses, not only closed trades.
One account, three trades, different answers
A $10,000 account at 1:30 with an 80% margin rule and a 5% daily loss limit ($500):
| Trade | Margin usage | Loss if stopped | Result |
|---|---|---|---|
| 1.5 lots EURUSD, 10-pip stop | 57% | $150 | Passes both |
| 0.5 lot gold at 4,200, $12 stop | 70% | $600 | Margin fine, breaks daily loss if stopped |
| 0.6 lot gold at 4,200, $3 stop | 84% | $180 | Small risk, breaks the margin rule |
The second trade looks safe on margin but can wipe out more than a day's allowance. The third risks very little yet breaks the margin rule the moment it opens. That's why checking only one of the two numbers isn't enough.
Static vs trailing, balance vs equity: two quick examples
Static vs trailing maximum loss. Take a $10,000 account with a $1,000 maximum loss. With a static limit the floor stays at $9,000 forever. With a limit that trails your highest balance, the floor moves up as you make money: once the balance reaches $10,800, the floor is $9,800. The same $1,000 cushion now sits much closer to your starting point.
Balance vs equity daily loss. You start the day at $10,000 with a 5% daily limit, so the floor is $9,500. A trade dips to −$450 before you close it at −$200. If the firm checks closed balance only, you used $200 of the day. If it checks equity, you came within $50 of breaching, even though the trade ended as a small loss.
Where each one shows up in MT5
Margin is on the Trade tab of the Toolbox, next to Balance and Equity. Drawdown isn't shown as a single number. Compare your current equity with the balance at the start of the day for the daily limit, and with your starting or highest balance for the maximum loss. Most firms show your loss limits in their dashboard, sometimes with a delay.
Which one should you watch?
Both, at different moments. Check margin before you enter, because that's when you choose the size. Watch drawdown while the trade is open, because that's when price decides it. The prop firm calculator checks margin usage and your remaining daily loss room together, and margin call vs stop out vs drawdown explains how these limits compare with your broker's own.