What is Trailing Drawdown?
A trailing drawdown is a dynamic loss limit that follows your account’s highest equity as you trade. Unlike a static drawdown (fixed from starting balance), a trailing drawdown moves upward as your account grows, protecting your profits while still enforcing risk limits.
However, the trailing drawdown will only move up until it reaches the initial account balance and will not increase beyond that level. Thus, once your account is in profit, you cannot lose the account due to the maximum loss limit as long as your balance stays above the initial balance.
During payout withdrawal the trailing loss stays the same. Thus, when requesting a payout, we recommend keeping a buffer in your account so you retain sufficient risk capital to continue trading comfortably after the withdrawal.
Please be informed that Trailing Drawdown is only applicable to Instant Funding Challenges.
How It Works:
Calculated from the highest equity or balance achieved
Moves upward as new highs are reached
Stops at the initial balance
Never moves downward
Once breached, the account is breached
Please see the example below:
Let’s say you have a $100,000 trading account with:
Trailing Drawdown: 10%
Target/starting account balance: $100,000
Step 0: Account started
Maximum loss allowed = $100,000 – $10,000 = $90,000
Step 1: Account grows
If you make $5,000 profit, the account balance will then become $105,000
Maximum loss allowed = $105,000 – $10,000 = $95,000
Step 2: Account grows more
You make $10,000 profit, your new account balance is $115,000
Maximum loss allowed = $115,000 – $10,000 = $105,000, but it can’t go above $100,000, so
Maximum loss allowed = $100,000
Step 3: Account drops
If your account falls to $100,000, you hit the trailing drawdown, then your account will be breached.
Before placing your first trade, it’s essential to understand which drawdown model your program uses. Static and trailing drawdowns behave very differently, and managing risk correctly depends on knowing how your limits are calculated.
Choosing the right approach and trading with awareness of your specific drawdown rules helps you avoid unnecessary breaches and build your account in a controlled, sustainable way.