Home Glossary Trailing drawdown
Trailing drawdown
Trailing drawdown — A loss limit whose floor rises with the account’s best point, so the room you have is measured from your highest balance rather than from where you started.
A static drawdown limit is a line drawn once. A trailing one is a line that climbs behind you, and it is why a funded account can be closed while it is still in profit.
In plain English
Start with a limit expressed as an amount below a reference point, usually a percentage of the starting balance. With a static limit the reference is the starting balance and never moves. With a trailing limit the reference is the highest point the account has reached so far, its high-water mark, and the floor sits the same fixed amount below it. Every new high lifts the floor; a fall never lowers it.
That one difference changes what the limit measures. A static limit asks whether you have lost the money you were given. A trailing limit asks whether you have given back too much of your own profit, and it keeps asking for as long as the rule applies. The trailing drawdown post works through the consequences at length; this page is the definition and the arithmetic.
Rule sets differ on two details worth reading for. The first is what the high-water mark is taken from: some trail the closed balance at the end of each day, others trail equity in real time, floating profit on open positions included. The second is whether the floor ever stops: in some rule sets it rises only until it reaches the starting balance, and behaves like a static floor from then on.
The formula
Trailing floor = highest balance (or equity) reached so far − the fixed drawdown amount
- The fixed amount is set once, usually as a percentage of the starting balance, and does not grow as the account grows.
- Where the rule locks at the starting balance, the floor is the lower of that result and the starting balance.
- A breach happens when the balance or equity, whichever the rule measures, falls to or below the floor.
Worked example — the demo account
A hypothetical $100,000 account with a $10,000 trailing limit that trails the closed balance at the end of each day. The floor starts at $90,000.
| Day 1 close | $104,000 | a new high, so the floor rises to $94,000 |
|---|---|---|
| Day 2 close | $108,500 | a new high, floor $98,500 |
| Day 3 close | $112,000 | a new high, floor $102,000 |
| Day 4 close | $101,500 | below the $102,000 floor: breached |
Breached on day 4 at $101,500, which is $1,500 above the starting balance and $10,500 below the high. Under a static $10,000 limit the floor would still be $90,000 and the account $11,500 clear of it.
Under a rule that stops the floor at the starting balance, day 3 would have lifted it only to $100,000, and day 4 would have survived with $1,500 to spare. That lock is the single detail most worth confirming before trading a rule set.
Intraday trailing is harsher again. Had the account shown $113,500 in floating profit during day 3 before closing at $112,000, an equity-based trail would have set the floor at $103,500, and even a day 4 close of $103,000 would have breached.
Every figure above is from the demo account TapeSheet ships with — 96 closed trades, generated from a fixed seed. Open the same account →
What this does not tell you
The caveat is the part worth reading, which is why it sits next to the number rather than in a footer.
- It cannot see open positions unless the rule says so. A statement records the balance when trades close, so a floor rebuilt from a statement is an end-of-day balance floor. If the rule set trails equity intraday, the real floor was higher than anything a statement can show.
- It does not give room back on a partial recovery. The space below the floor only grows again when the account sets a new high. Climbing back part of the way after a drop leaves the floor exactly where the old high put it.
- It is not one number across firms. The percentage, what it trails, when it is measured and whether it locks all vary, and a rule set can change between versions. Read the current rules for the account you actually hold.
Where TapeSheet shows it
The prop firm tracker in the analyzer takes a maximum drawdown set as static or trailing, with the profit target, daily loss limit and minimum trading days, and replays your statement day by day against it, so you can see on which day, if any, a trailing floor would have caught your own history.
Questions
Is trailing drawdown worse than static drawdown?
For the trader, usually. Both start the same distance below the starting balance, but a trailing floor follows every new high upward and never comes back down, so after a profitable run it sits closer to the balance than a static floor ever would.
Does a trailing drawdown ever stop moving?
In some rule sets, yes: the floor rises until it reaches the starting balance and then stays there, which makes it a static floor from that point on. Where a rule set does not say so, assume it keeps trailing.
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