Trailing drawdown
A prop-firm loss limit that rises with your balance instead of staying fixed at the starting number.
A prop-firm loss limit that rises with your balance instead of staying fixed at the starting number.
Prop evaluations protect firm capital with a maximum loss line. A static drawdown sits at a fixed distance below your starting balance no matter how much you earn; a trailing drawdown climbs as your equity climbs, usually tracking the high-water mark of end-of-day balances, and locks at a floor once it reaches a set cushion. Trailing is stricter on winning streaks - the better you do, the less room you have for a normal losing day.
Three details decide how the rule behaves in practice: whether it trails intraday or only on closed end-of-day equity, whether it trails from balance or from equity including floating positions, and where it stops trailing - typically a few hundred dollars above the starting figure. Firms publish these specifics in their rules, and the difference between intraday and end-of-day trailing is often the difference between passing and failing an evaluation.
Worked example
A $100,000 account with a 5% trailing drawdown starts the limit at $95,000. After you close days at $103,000, the limit has followed up to about $98,000 - but once the rules' cushion rule kicks in it stops rising, permanently protecting part of the profit you already banked.
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