Every prop firm sets a maximum drawdown, the lowest your account can fall before it is closed. The catch is how that floor is measured. A fixed drawdown is anchored to your starting balance. A trailing drawdown follows your account up as it makes money, which sounds generous and is actually the stricter of the two.

Fixed drawdown

On a $100,000 account with a 10 per cent fixed drawdown, the floor is $90,000 and it never moves. Make $8,000 and your buffer is now $18,000. Simple, and forgiving once you are ahead.

Trailing drawdown

On the same account with a 10 per cent trailing drawdown, the floor starts at $90,000 but rises with your highest balance, or on some firms your highest equity including open trades. Reach $105,000 and the floor is now $95,000. Reach $108,000 and it is $98,000.

Account highTrailing floor (10%)Room below the high
$100,000 (start)$90,000$10,000
$104,000$94,000$10,000
$108,000$98,000$10,000
$110,000 then back to $103,000$100,000you are $3,000 from a breach while $3,000 in profit

The last row is where traders get caught. You pushed to $110,000, gave back $7,000, and you are still up $3,000 on the challenge, but the trailing floor sits at $100,000 and one more bad trade closes the account.

Equity trailing vs balance trailing

The harsher version trails your highest equity, meaning an open trade that is briefly $4,000 in profit pulls the floor up by $4,000 even if you close that trade at breakeven. The gentler version trails only your closed balance. Read the terms to see which one applies, because it changes how you manage a winning trade.

Many firms freeze the trailing floor once it reaches your starting balance plus the drawdown amount, or once you are funded. On a $100,000 account with a $10,000 trailing drawdown, the floor often stops rising at $100,000. After that it behaves like a fixed drawdown at the starting balance.

How to trade around it

  • Bank partial profit rather than letting a big winner balloon your equity high and drag the floor up with it.
  • Know your current floor before every session. It is not the number you started with.
  • On an equity-trailing account, be wary of holding several open winners at once, because their combined unrealised profit sets a floor you then have to stay above.
  • Once the floor freezes, you can trade with the room you have earned. Before that, treat every new equity high as a new, higher risk line.
Illustrative case: A funded trader who breached in profit

Marco was up 6 per cent on a $50,000 equity-trailing account. One trade ran to +$1,900 unrealised, pulling his floor up, then reversed, and he closed it at +$200. Two more small losses left his balance at $51,400, up 2.8 per cent on the challenge, but below the trailing floor of $51,500. Account closed. Had the floor been balance-trailing, the spike to +$1,900 would not have counted.

Traders read the profit target and the daily loss limit carefully and skim the drawdown line. On a trailing account the drawdown is the rule that ends most funded accounts, and usually while the trader still thinks they are winning.
FX Recap viewEditorial team

Frequently asked

What is a trailing drawdown on a prop firm account?

It is a maximum-loss floor that rises as your account makes new highs, then stops. Starting on a $100,000 account with a 10 per cent trailing drawdown, the floor is $90,000, but reach $105,000 and it becomes $95,000. It is stricter than a fixed drawdown because giving back profit can breach it even while you are still up on the challenge.

Does trailing drawdown use balance or equity?

It depends on the firm. Balance-trailing follows only your highest closed balance. Equity-trailing follows your highest equity including open trades, so a trade that is briefly deep in profit pulls the floor up even if you close it flat. Equity-trailing is harsher and changes how you should manage a winning position.

When does the trailing drawdown stop moving?

On most firms it freezes once it reaches your starting balance plus the drawdown amount, or once you move to the funded stage. On a $100,000 account with a $10,000 trailing drawdown, the floor typically stops rising at $100,000 and then behaves like a fixed drawdown.

Can I breach the drawdown while still in profit?

Yes, on a trailing account. If you hit a high, then give back enough that your balance falls below the trailed floor, the account closes even if you are still up on the challenge overall. Banking partial profit and knowing your current floor before each session are the defences.