With a static drawdown, the floor is fixed, for example 10% below the starting balance. With a trailing drawdown, the floor sits a fixed amount below the highest balance or equity reached and rises whenever the account does. Some firms stop trailing once the floor reaches the starting balance. Whether it trails closed balance or intraday equity makes a big difference.
Example
A $50,000 account with a $2,500 trailing drawdown starts with a floor of $47,500. The trader grows it to $53,000, and the floor rises to $50,500. A losing week back to $50,400 ends the account, even though it is still above the starting balance. With trailing on equity, an open trade that touched +$1,000 before closing flat would also have lifted the floor by $1,000.
Why it matters
Trailing drawdown is the rule that surprises prop traders most. Profits do not build a cushion the way they would with a static limit, so risk per trade has to stay under control even when the account is up.
Common mistake
Letting winners run deep into profit and back on an account that trails equity. The peak unrealised profit raises the floor, so giving it back can breach the limit on a trade that closed at break-even.
Put it into practice
- Free toolDrawdown recovery & compounding calculatorSee the gain you need to recover from any drawdown, how many losses in a row get you there, and how a steady return compounds over time.
- In FlowsenseProp challenge trackerYour firm's rules against your real trades: the room left before every breach, with a warning at 80%.
FAQ
- What is the difference between trailing and static drawdown?
- A static drawdown has a fixed floor below the starting balance. A trailing drawdown's floor rises with your highest balance or equity.
- Does a trailing drawdown ever stop moving?
- At many firms, yes: it stops once the floor reaches the starting balance and then behaves like a static limit. Check your firm's rules.
- Does trailing drawdown use balance or equity?
- It depends on the firm. Trailing on equity counts open profits at their peak and is stricter than trailing on closed balance.