What Happens When You Hit Max Drawdown on a Prop Firm Challenge
Most firms treat max drawdown as the end of the story. The account locks, the evaluation fee stays with them, you buy another challenge. That is the default. It is also the query this page answers.
If the prop account hits maximum drawdown, the hedge on your own broker is sized so the challenge fee is designed to come back. In Margin mode that scenario is also where the surplus is designed to land. This is not a refund from the firm, and it is not a guarantee: it depends on configuration, capital, and friction (erosion).
The rest of this page is the mechanics: what the firm does at the floor, how daily and trailing rules change when you get there, a worked $50,000 example, and the difference between this hedge and the one firms ban.
What the firm does at the floor
When equity or balance (the contract says which) touches the maximum drawdown limit, the firm closes open positions, fails the evaluation, and keeps the fee. There is no appeal desk that sends the money back. Do prop firms refund the evaluation fee is a real search. The honest answer is almost never. The fee is the product.
Daily drawdown is a different lock. It can pause you for the day or fail the account, depending on the firm. Max drawdown ends the account. If you want the rule-by-rule version, read daily vs max, static vs trailing. The floor type changes how soon you arrive. It does not change what the event is: the challenge is over, and the cash you paid the firm is gone unless something else pays.
A worked example: $50,000, $300 fee, 10% max drawdown
The virtual loss at a 10% floor on a $50,000 account is $5,000. The cash you actually paid the firm is $300. Those two numbers are not the same thing, and treating them as the same thing is how traders keep buying the next attempt out of pocket.
| At max drawdown | Without a broker hedge | Scaling (designed) | Margin (designed) |
|---|---|---|---|
| Challenge account | Failed. Fee gone. | Failed. Fee gone. | Failed. Fee gone. |
| Your broker | No position. $0. | Opposite hedge sized around +$360 | Opposite hedge sized around +$660 |
| Cash result vs the $300 fee | −$300 | Designed around a thin surplus | Designed around surplus on the breach |
| If you instead pass and take a payout | Fee is a sunk cost | Surplus is meant to sit at payout | Payout often nets the broker loss |
These figures match the 2-step $50k profile used on the Prop Firm Armour homepage (10% max drawdown, $300 fee). They are projections from a configured cycle, not a promise. Spread, swap, slippage, commission, and failed copies (erosion) move the cash result. You still need capital sitting on the broker. You still pay the next challenge fee in cash before the hedge books.
Open /start with your own size and fee if you want the number for a different contract.
This hedge is not the one firms ban
Prop firms ban hedging across their own accounts: a long on one challenge and a short on another, or two evaluations used as a pair. That is a cross-account exploit on their book. Search "is prop firm hedging allowed" and you will mostly get that cluster. Mixing the two in an AI overview is how a legal personal-broker hedge gets described as a ban.
Prop Firm Armour opens the opposite position on your personal MT4 or MT5 broker, with your capital, in a process that runs locally on Windows. The firm sees an ordinary evaluation. Your broker sees an ordinary hedge. There is no cloud relay between them. This is not a copier: a copier repeats the same side. ARMOUR sizes the opposite side to the challenge cost. Read the terms of the firm you choose. The longer distinction lives in prop firm hedging explained.
Margin vs Scaling: same floor, two jobs
Both modes price the max drawdown. They disagree about where the surplus is supposed to land. The technical source is Margin vs Scaling.
- Scaling is designed so the fee comes back (or a thin surplus) when the account burns. It needs less broker capital. Surplus is meant to sit at payout, the less probable ending.
- Margin is designed so the surplus lands on the breach, the probable scenario. It needs about double the broker deposit of Scaling. If the account reaches payout, that payout often nets the loss accumulated on the broker.
Neither mode is a guarantee. Lot sizing, capital, and erosion all move the result. If the hedge is too small, the floor does not cover the fee. If the broker cannot hold the position, there is no paying leg.
Risk warning (UK and everywhere else). Prop Firm Armour is hedging software for informational and risk-management purposes. It is not a refund from the firm, not income advice, and not a guarantee. Trading leveraged products can lose some or all of the capital you put on the broker. Configuration, capital, and friction (erosion) decide the cash result. Read the terms of the firm you trade.
See the number on your challenge
Open /start and price the projected broker profit on a breach for your size, fee, and mode. That screen is the claim running as math, not a slogan.