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Dropped grades are done through Assignment Groups in Canvas.
- Click on the Assignments area of your Canvas course
- Find an Assignment Group to work on (Tests for example).
- Click the three vertical dots at the upper right side of the main Assignment Group row.
- Click Edit. (It will have a pencil icon.)
- In the pop up menu that appears, you will see the group name, the percentage of the grade, and the number of scores to ignore for each student.
- Edit the number of scores to ignore in the appropriate areas, either lowest or highest.
- Note that you can also add assignments that should never be dropped by clicking the + sign for Add an Assignment in the never drop area.
- Click Save to save the rule.
Here is a link with more detailed information from Canvas.