Trailing drawdown

A trailing drawdown is a moving maximum-loss limit that follows your account's highest point upward. As your balance (or equity) reaches new peaks, the drawdown floor trails behind it by a fixed amount; when the account falls, the floor stays put. This means early profits effectively become locked in as a higher bar you must not break.

For example, on a $50,000 account with a $2,500 trailing drawdown, your floor starts at $47,500. If you grow the account to $53,000, the floor trails up to $50,500 — so you can now no longer drop back to your original balance without breaching. Firms differ on whether the trail follows intraday equity (including unrealised gains) or only the end-of-day closed balance, which dramatically changes how tight the rule feels.

The trailing drawdown is the rule that catches most traders by surprise. Banking a big unrealised gain and then giving it back can breach an intraday-trailing account even though your closed balance is still in profit — so understanding exactly how your firm calculates the trail is essential.