Free tool · for prop firm traders
The Drawdown Ladder
Most prop accounts aren't lost on one bad day. They're lost by trading normal size, or bigger, while the drawdown quietly runs out. The ladder decides your size by what's left, and you set it once, on a calm day.
Risk per trade halved until the drawdown is back under half. A+ setups only.
Most one trade should risk: $230
What's left, $1,150, divided by 5 losses of room. If the next 5 trades all lose, the account is still alive.
On this step, also keep it to half your normal risk per trade. Use whichever is smaller.
At a 10-point stop on MNQ: 11 contracts at most, about $220 at risk.
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The four steps
| Step | Drawdown used | What to do |
|---|---|---|
| 1 · Normal | under a third | Trade your plan at your normal size. |
| 2 · Review | a third to a half | Before the next session, go through the last week's trades and find what the losses had in common. Size stays the same, and doesn't go up. |
| 3 · Half size | a half to two thirds | Risk per trade halved until the drawdown is back under half. A+ setups only. |
| 4 · Pause and reset | two thirds or more | Stop for the rest of the week. Next week, restart at the smallest size you can trade, and let size come back only as the drawdown recovers below half. |
One rule holds on every step but the first: size never goes up while you're in drawdown. The urge to win it back faster is strongest exactly when the account can least afford it.
Why size by what's left
A $500 loss means something different on a fresh account than on one with $600 of drawdown left. On the first it's a bad day. On the second it's most of the account. Trading the same size in both is how a normal losing streak turns into a failed account.
The second number in the calculator does the same job from the other side: whatever is left gets divided by the losses you want room for. With five losses of room, the next five trades can all lose and the account is still alive. If one trade at your stop doesn't fit that budget, the trade is too big for the account you have today, however good the setup looks.
Where the steps come from
Some traders run a simple ladder on their own accounts: review the journal at 5% down, half size at 10%, stop at 15%. On a prop account the firm's maximum drawdown is the whole ladder, so the steps here are shares of it instead. The thresholds and the five losses of room are rules of thumb, not laws. What matters is that you pick them before you need them, not in the middle of a losing week.
Check your firm's rules too. Some use a trailing drawdown that moves up with your best balance, some a daily loss limit on top of it. Put in what your dashboard says you can still lose today, and recalculate after every session.
The part a calculator can't do
Knowing the number and trading it are two different skills. LAYER 0 is built for the second one: a check of your state before every session, limits you sign on a calm day, a lockout after a logged loss, and a day that ends when your limit is reached. More on sizing in Find Your Comfort Loss Before You Size a Trade and The Size Was Never About the Money.
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Every trading educator tells you to follow your rules. LAYER 0 is what stands between the rule and the click.
Start FreeEducational tool, not financial advice. It doesn't know your firm's exact rules; check them before you trade.