The maximum amount your account equity can decline from its highest recorded point during an evaluation or funded account. Unlike static drawdown, the trailing drawdown level moves upward as your account reaches new equity highs, but never moves back down.
Why It Matters
- 1Trailing drawdown is one of the most common reasons traders fail prop firm evaluations.
- 2Because the drawdown threshold rises with your peak equity, early profits can actually work against you — your safety buffer shrinks as your high-water mark climbs.
- 3Understanding whether a firm uses trailing or static drawdown fundamentally changes how you should manage risk during an evaluation.
Example
You start a $100,000 evaluation with a 6% trailing drawdown ($6,000). Your initial drawdown floor is $94,000. On Day 3, your account peaks at $105,000 — your drawdown floor rises to $99,000. On Day 5, you have a losing day and your equity drops to $99,500. Even though you're still profitable overall (+$5,000 from start), you're now only $500 away from failing because the drawdown floor trailed your peak upward.
Common Mistakes
- ✖Not realizing the drawdown level moves UP but never moves DOWN — once your high-water mark increases, your safety
- ✖Confusing trailing drawdown with static drawdown and trading too aggressively after early profits
- ✖Failing to track your real-time drawdown floor, especially when the firm calculates it intraday rather than end-of-day