Trailing Drawdown

Detailed Explanation

Trailing drawdown is common in futures prop firms and some forex prop firms. Unlike static drawdown (which is measured from the initial balance), trailing drawdown follows the highest account balance achieved. For example, on a $50,000 account with a $2,500 trailing drawdown: if the balance reaches $52,000, the drawdown floor rises to $49,500. This means the trader can never let the account fall more than $2,500 below the peak equity. Trailing drawdown is generally considered more challenging than static drawdown because profitable trades raise the floor, giving less room for subsequent losses.