Trailing Drawdown Explained

Trailing drawdown is one of the easiest prop firm rules to misunderstand. It moves with your account equity or balance until it reaches a maximum stop level set by the firm.

Why it matters

A trader can be profitable overall and still fail an account if open profit pulls the trailing threshold up and a later pullback breaches it.

What to check

• Does the drawdown trail equity or closed balance?
• When does it stop trailing?
• Is it calculated intraday or end of day?
• Does unrealised profit affect the limit?

Before buying a challenge, read the exact example in the firm’s rules and compare it against how you manage trades.

Compare prop firms or return to the rules guide.