Maximum drawdown
The largest loss an account may take, measured from a reference level, before the account fails.
Also called max loss or overall loss limit. It is usually a percentage of the starting balance, and it defines a floor: if your balance or equity reaches the floor, the challenge or funded account ends.
What matters is where the floor sits and whether it moves. A static drawdown fixes it for good; a trailing drawdown raises it as you make new highs. Many firms also check it against live equity rather than closed balance, so an open loss counts.
Related
General definition. Rules differ between firms and change over time; your firm’s current terms always take precedence.