An intraday trailing drawdown is a strict risk management rule used by some prop firms. It tracks the highest unrealized (open) profit reached during a trading session and uses that peak to adjust the maximum allowed loss. The limit moves upward as the account reaches new peaks but never moves down if profits decrease. Because of this, traders can fail even while still in overall profit if equity drops below the locked-in threshold.
Why It Matters
- 1Intraday drawdown is stricter than end-of-day drawdown because the system continuously tracks your highest equity during the session.
- 2If your account reaches a new peak, the drawdown floor moves up instantly, even if the profit was only temporary.
- 3This means that large intraday gains can quickly tighten your risk limit, and if the market reverses, your account can breach the drawdown much faster.
- 4Because of this, traders must manage positions carefully and avoid letting large floating profits retrace significantly.
Example
● Account: $100,000 with a $5,000 intraday trailing drawdown ● Starting drawdown limit: $95,000 ($100,000 − $5,000) You enter a trade that reaches $3,000 in open profit, bringing your equity to $103,000. ● New peak equity: $103,000 ● New drawdown limit: $98,000 ($103,000 − $5,000) The market later reverses and the trade closes with a small profit, leaving your balance at $100,500. However, the drawdown limit remains at $98,000 because the peak equity of $103,000 was already recorded.
Common Mistakes
- ✖Letting winners reverse:
- ✖Using large position sizes too early:
- ✖Trading during high impact news: