The Second Chance Mechanism Most Traders Misunderstand
When a funded trader’s account balance drops significantly below its starting level, two outcomes are possible: the account breaches and closes, or the trader uses an available drawdown reset to restore their headroom. Drawdown resets — also called account resets or balance resets — are one of the most misunderstood features in the prop trading ecosystem.
Used correctly, a drawdown reset is a strategic tool. Used incorrectly, it is an expensive way to defer an inevitable closure. This guide explains everything you need to know.
What a Drawdown Reset Is
A drawdown reset modifies your account’s drawdown calculation reference point. The specific mechanism varies by firm and account type, but the core function is the same: it gives your account more room to continue trading without breaching by adjusting the baseline from which your maximum drawdown is measured.
Example: You have a $100,000 funded account with 10% maximum drawdown (floor at $90,000). After a difficult period, your balance is $92,000 — you have $2,000 of remaining drawdown headroom before breach. You purchase a drawdown reset that resets your drawdown floor to $82,800 (10% below your current balance of $92,000). You now have $9,200 of headroom instead of $2,000.
This is the value of a reset: restoring operational room to continue trading when your current headroom is critically low.
When Resets Make Sense
A drawdown reset is financially rational when:
Your strategy’s losing streak is behind you. If you have experienced an unusual losing period due to specific market conditions that have changed, and you are confident your edge is intact, a reset buys you the room to recover rather than forcing you to start a new evaluation from scratch.
The reset cost is lower than a new evaluation. If a reset costs $150 and a new evaluation for the same account size costs $500, the reset is the better value assuming your strategy can generate recovery.
You are close to the drawdown floor but not past it. Resets work best when you have some remaining headroom — if you are literally at the breach point, you may not have enough room to trade through even a single losing trade before the reset takes effect.
When Resets Are a Mistake
A drawdown reset is financially irrational when:
Your strategy has a fundamental problem. Buying a reset to continue trading a strategy that has been consistently losing is expensive loss deferral. The reset does not fix the strategy.
You are in a bad psychological state. If you are trading emotionally — chasing losses, over-sizing, revenge trading — a reset does not fix the psychology. You will breach the reset headroom for the same reasons you depleted the original headroom.
You need multiple consecutive resets. If you have purchased two resets and are considering a third on the same account, something fundamental is wrong. The correct response is to stop, review, and address the underlying cause before spending more money.
Types of Resets Available
Balance reset: Resets the account balance to the original starting value, eliminating paper losses but not restoring actual lost capital. This is the most common type.
Equity reset: Resets the account’s equity high-water mark for trailing drawdown calculations, providing more headroom without changing the current balance.
Full account reset: Some firms offer a complete account reset — balance, drawdown floor, and trading history all returned to starting conditions. This is essentially a new evaluation on the same account, typically priced at a discount to a new evaluation purchase.
Firm-Specific Reset Policies
Reset availability and pricing varies significantly across firms:
FTMO offers account resets through a structured process with defined pricing. FTMO’s resets are available on funded accounts (not evaluations) and are priced based on account size.
FundedNext provides reset options with clear pricing on its funded account lineup, and has been transparent about when resets make financial sense for traders through its educational content.
Futures firms including Apex Trader Funding have their own reset mechanics. Apex’s evaluation resets (for evaluation accounts that have not yet passed) are particularly relevant given the firm’s multi-account model.
The Mathematical Decision Framework
Before purchasing a reset, calculate:
- Reset cost: What does the reset actually cost?
- Expected recovery time: Based on your average monthly return, how long will it take to recover to a meaningful payout level from your current balance?
- Alternative cost: What does a new evaluation at the same account size cost with current available discounts?
- Opportunity cost: How much time would starting fresh (new evaluation) cost versus using the reset?
If (reset cost × recovery time) < (new evaluation cost), the reset is financially rational assuming strategy quality is intact.
Make this calculation before every reset purchase decision. The emotional appeal of “saving” an account often leads to reset decisions that are actually more expensive than starting fresh.
Explore more on GoPropReels — forex firms, futures firms, all coupons. Top picks: FTMO (ftmo.com), Apex, FundedNext, Topstep.