Trailing Drawdown
Trailing drawdown is a dynamic loss limit that rises with the account's highest recorded equity or balance (the firm defines which), keeping a fixed distance below that high until any lock point, so the floor never decreases but moves upward with each new high.
Trailing drawdown comes in two timing variants: intraday trailing, which moves the floor up during the session, and end-of-day (EOD) trailing, which updates only at the daily close, although the floor still applies in real time during the session. What drives an intraday floor is firm-defined: some firms track equity, including unrealised profit on open positions, while others track balance and raise the floor only when a trade closes at a new high. Equity-based intraday trailing is the most punishing variant — a trade that peaks in profit and pulls back before it closes 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 and never moves back down. The floor is a breach level, not protected profit: if equity reaches or falls below it (the firm defines which), the account fails. The distance between the account's high and the floor stays fixed at the original drawdown amount until the lock triggers, so every pullback from the high shrinks the buffer between current equity and the floor.
On a $10,000 account with a $1,000 (10%) trailing drawdown whose floor does not lock, a trader who pushes the account to $11,500 on a winning streak now has a floor at $10,500, so a return to the original starting balance is no longer survivable. An equity pullback of 4% from the new high ($460) does not hit the floor, but a 9% retracement does, and adding size on the run-up raises the cash risk per trade against a buffer that stays fixed in dollars and shrinks relative to account size.
Trailing drawdown across a $1,500 run-up
Account: $10,000. Trailing drawdown: 10% = $1,000 below the equity high. Initial floor: $9,000. This account's floor has no lock, so it keeps rising with every new high.
Trader closes the week at $11,500 in equity (up $1,500), the account's highest equity so far. 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 3 more maximum-loss trades; the 4th breaches. The same loss on a static-drawdown account would have left the trader $1,900 above the fixed $9,000 floor. On an account whose floor locks at the starting balance, the floor would stop at $10,000, leaving $900 of distance and 8 survivable losses at $109.
Drawdown types explainedHow the trailing floor compares with static and end-of-day rules, with the floor-lock milestone worked through.Related terms
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Common questions
Does the trailing floor track open-position floating profit?
It depends on the variant. Equity-based intraday trailing includes floating P&L in the high: if a position takes equity $1,000 above the previous high, the floor rises $1,000 before the trade closes, until the floor reaches any lock point, and a pullback that erases the floating profit leaves the higher floor in place. That is why equity-based intraday trailing is the most punishing variant. Balance-based intraday trailing raises the floor only when a trade closes at a new balance high. EOD trailing measures only the daily closing balance and does not capture intraday peaks, although the floor still applies in real time during the session.
Does the trailing floor stop rising at any point?
It depends on the firm. Some trailing floors stop rising once they reach the starting balance: on a $10,000 account with a 10% trailing drawdown, the floor stops rising when the account's high reaches $11,000, then stays at $10,000 as a static floor. Some firms set the lock point a fixed amount above the starting balance, and some trailing floors never lock, so they keep rising with every new high. The account rules state which model applies.