Trailing versus static drawdown: the rule that ends most funded accounts
Two accounts with the same $2,500 loss limit can be very different to trade. The difference is whether the floor moves.
Kivorent News desk, , 2 min read
What to know
- A static drawdown sets a floor that never moves. A trailing drawdown raises the floor as the account makes new highs.
- An intraday trailing drawdown counts profits you have not locked in, so a winning trade that reverses can close the account.
- Always confirm when the floor stops trailing. Many firms lock it once it reaches the starting balance.
Every funded trading account has a maximum drawdown: a balance below which the account is closed. Firms calculate it in different ways, and the method matters more than the dollar figure.
Static drawdown
The floor is set on day one and stays there.
On a $50,000 account with a $2,500 static drawdown, the floor is $47,500. If you grow the account to $53,000, the floor is still $47,500 and your cushion is now $5,500. Profits buy you room.
Trailing drawdown
The floor follows the account's highest point, staying a fixed distance below it. It moves up and never down.
Same account, with a $2,500 trailing drawdown:
| Account high | Floor | Cushion from the high |
|---|---|---|
| $50,000 at the start | $47,500 | $2,500 |
| $51,000 | $48,500 | $2,500 |
| $52,000 | $49,500 | $2,500 |
| $52,500 | $50,000 | $2,500 |
However much you make, a $2,500 pullback from the peak ends the account. Profits do not buy room.
End-of-day and intraday trailing
Trailing drawdowns differ in when the high is recorded.
End-of-day trailing updates the floor from your closing balance. What happens during the day does not move it.
Intraday trailing updates the floor in real time and includes open, unrealized profit. This is the strict version. Here is how it catches people:
- The account is at $50,000 and the floor is $47,500.
- You open a trade that runs $1,500 into profit. Your equity touches $51,500, and the floor rises to $49,000.
- The trade reverses and you close it at breakeven. Your balance is $50,000.
- You made nothing, and your cushion has gone from $2,500 to $1,000.
If the next trade runs to $52,500 before reversing to breakeven, the floor rises to $50,000, the same as your balance. You have no room left, and no trade has lost money.
When the floor locks
Many firms stop trailing once the floor reaches the starting balance. In the table above, the floor would lock at $50,000 when the account first reaches $52,500. From then on it behaves like a static floor.
Getting past that point is the first job on a trailing account. Until then, each new high tightens the leash.
What it changes about how you trade
- On intraday trailing accounts, take profits deliberately. A winner you let reverse costs cushion even at breakeven.
- Size from your real cushion. Your risk budget is the distance to the floor right now, not the headline drawdown.
- Start smaller than you think you need to. The early stretch, before the floor locks, is the fragile one.
- Find out what counts. Ask whether commissions and open losses are included.
Comparing two offers
A $3,000 intraday trailing drawdown can be harder to live with than a $2,000 static one. When you compare firms, write out the same sequence of trades under each rule set and see where the floor ends up.
Drawdown is one of several rules in a funded account. For the others, see prop firm evaluations explained.
This article is general information. It is not investment advice, and trading involves the risk of losing money.
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