Glossary
Trailing drawdown
A trailing drawdown is a loss limit that moves up as the account reaches new highs, so the room to lose is measured from the highest point.
What it means
With a static drawdown, the floor stays a fixed amount below the starting balance. With a trailing drawdown, the floor follows the account up as it grows. It never moves down.
Firms trail in different ways. Intraday trailing follows the highest equity at any moment, including open profit that was never banked. End of day trailing moves the floor only at the daily close. Many firms also stop trailing once the floor reaches the starting balance, which locks it there.
Trailing drawdown is common at futures prop firms, and traders often misread it because the floor keeps moving. A dashboard that shows the current floor in money, not only as a percentage, answers the question before it becomes a support ticket.
Worked example
A $50,000 account has a $2,500 trailing drawdown, so the floor starts at $47,500. The account grows to $52,000, and the floor rises to $49,500. If the account then falls back to $49,500, it fails, even though it is still close to where it started.
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