Trailing Drawdown
Trailing drawdown is a dynamic loss limit that rises in step with the trader's account equity as profits accumulate, maintaining a fixed distance between the current loss threshold and the account's highest recorded equity point, so the floor never decreases but moves upward with each new equity high.
Trailing drawdown comes in two timing variants: intraday trailing, which updates the floor in real time as equity rises during the session, and end-of-day (EOD) trailing, which updates only at the daily close. Intraday trailing is the more punishing variant — a trade that peaks in profit and pulls back before close still raises the floor.
This page covers the mechanic; it is not trading advice.
Prop firm rules vary between firms and change frequently. Always verify specific rules directly with your firm before making any decision.
How the trailing floor moves
A moving floor that follows your profits upward. Every time your account reaches a new high, the loss threshold rises by the same amount, locking in a portion of your gains as a permanent floor below which the account cannot fall. The buffer between current equity and the floor remains fixed at the original drawdown amount until the lock triggers.
The mechanic ends accounts during normal pullbacks. A trader who pushes the account to $11,500 on a winning streak now has a floor at $10,500 — meaning a return to the original starting balance is no longer survivable. A standard market pullback of 4% on the new high ($460) does not hit the floor, but a 9% retracement does, and many traders compound this risk by adding size on the run-up.
Trailing drawdown across a $1,500 run-up
Account: $10,000. Trailing drawdown: 10% = $1,000 below the equity high. Initial floor: $9,000.
Trader closes the week at $11,500 in equity (up $1,500). The trailing floor has moved to $11,500 − $1,000 = $10,500. The original starting balance is now below the floor — a return to $10,000 would breach the account.
The following Monday the trader takes a $600 loss on a single trade. Equity drops to $10,900. Distance to the floor: $10,900 − $10,500 = $400. At 1% risk per trade ($109 against the new equity base), the trader survives approximately 3 more maximum-loss trades before breach. The same loss on a static-drawdown account would have left the trader $1,900 above the fixed $9,000 floor.
Related terms
Common questions
Does the trailing floor track open-position floating profit?
Intraday trailing variants typically include floating P&L in the equity-high calculation — a position floating $1,000 in profit raises the floor by $1,000 even before the trade closes. A pullback that erases the floating profit still leaves the higher floor in place. This is the structural reason intraday trailing is considered the most punishing variant. EOD trailing measures only the daily closing balance and does not capture intraday equity peaks.
Does the trailing floor stop rising at any point?
Yes, at the drawdown floor lock. Most firms specify that the trailing floor stops rising once the account has accumulated profit equal to or greater than the original drawdown allowance. On a $10,000 account with a 10% trailing drawdown, the floor stops rising at $11,000 in equity. The floor then locks at $10,000 (the original starting balance) and converts to a static rule for the remainder of the account's life.