Static, trailing and end-of-day drawdown
Lesson 6 · about 11 min
The maximum drawdown is the amount you may lose before the account is failed. It is the real size of your account. But "maximum drawdown of $2,000" means three different things depending on whether it is static, trailing intraday, or trailing end-of-day. The difference has ended more evaluations than any other rule.
The three definitions
Static drawdown. The failure line is fixed at starting balance minus the allowance. On a "$50,000" account with a $2,000 static drawdown, the line is $48,000 forever. Profits raise your cushion; nothing lowers the line.
Trailing drawdown (intraday, on unrealised equity). The line sits $2,000 below the highest equity the account has ever reached, including open profit that was never realised. Every new high, even for a second, raises the line. The line never comes down.
End-of-day (EOD) trailing drawdown. The line sits $2,000 below the highest end-of-day closed balance. Intraday spikes do not count; only the balance at session close moves the line. The line never comes down.
Most firms that trail stop trailing once the line reaches the starting balance (or starting balance plus a small buffer, such as $100). After that the account behaves as if it were static at that level.
Worked example, same trades, three outcomes
Start: $50,000. Allowance: $2,000. Three trading days.
| Day | Intraday peak equity | Closing balance | Static line | Intraday trailing line | EOD trailing line |
|---|---|---|---|---|---|
| 0 | $50,000 | $50,000 | $48,000 | $48,000 | $48,000 |
| 1 | $51,600 | $50,700 | $48,000 | $49,600 | $48,700 |
| 2 | $51,900 | $50,900 | $48,000 | $49,900 | $48,900 |
| 3 | $50,900 (no new high) | $49,800 | $48,000 | $49,900 | $48,900 |
At the end of day 3 you have a closed balance of $49,800, which is a $200 loss from the start.
- Under static rules you are $1,800 above the line. Fine.
- Under EOD trailing rules the line is $48,900 and you have $900 of room. Uncomfortable.
- Under intraday trailing rules the line is $49,900, and your $49,800 balance is below it. The account failed on day 3, on a $1,100 losing day, even though you have lost only $200 net over three days.
The difference is entirely due to the open profit on day 2 that reached $1,900 (equity $51,900) and was closed at $900. Under intraday trailing, giving back that $1,000 of open profit permanently moved the failure line up by the full amount of the peak.
Key idea: Under an intraday trailing drawdown, unrealised profit you do not take is not "still there". It has already been used to raise your failure line. Under this rule, a runner that reverses costs you twice.
What each rule does to your trading
Static. You can let winners run, scale out, and hold through pullbacks. The cost of a giveback is only the giveback. The trade-off is that firms with static drawdowns usually pair them with smaller allowances, higher fees, or tighter daily limits.
EOD trailing. You can still let a trade run within the day; only the close matters. The main discipline is not to end a day at a large new high and then lose a chunk the next morning. Room shrinks each time you close at a high, so a strong day followed by a normal losing day is where accounts die.
Intraday trailing. Every tick of open profit above the previous peak is booked against you. This punishes runners and rewards taking profit. It also makes a sensible practice, moving a stop to breakeven and letting the trade work, actively costly, because the peak has already been counted. Traders under this rule often adopt fixed targets and small size until the line locks at the starting balance.
The lock
The trail typically stops when the line reaches the starting balance (sometimes starting balance plus $100). On a $50,000 account with a $2,000 allowance, that happens when peak equity (or peak EOD balance) reaches $52,000 or $52,100. From that moment the account has a $2,000 fixed cushion and the trailing trap is gone.
That gives a clear first objective on any trailing account: get the line to lock. On a $50,000 account with a $3,000 target and a $2,000 trail, the lock happens at $52,000, before the target. On a "$100,000" account with a $6,000 target and a $3,000 trail, the lock happens at $103,000, halfway to target. The second half of the evaluation is played with a fixed line.
Reading the rules page for drawdown
Answer these from the firm's own words, not from a comparison site:
- Static, intraday trailing, or EOD trailing?
- Does it trail on unrealised (open) equity, or on closed balance only?
- Where does it stop trailing (lock), if at all?
- Does the allowance shrink on the funded account (some firms reduce it on funding)?
- Are commissions and fees included in the equity calculation?
| Rule wording you may see | Usually means |
|---|---|
| "Trailing threshold", "max loss limit that follows" | Intraday trailing on equity |
| "End-of-day trailing", "EOD drawdown" | Trails on closing balance |
| "Static drawdown", "fixed max loss" | Static |
| "Relative drawdown" (forex) | Often trailing on balance |
| "Absolute drawdown" (forex) | Static from starting balance |
Try it: Take your last ten trades from any log with their maximum favourable excursion (highest open profit) and closing profit. Run them through all three rules on a $50,000 / $2,000 account and find the day, if any, that an intraday trail would have failed you. Most traders find one.
Recap
- Static drawdown fixes the failure line; EOD trailing moves it up with closing highs; intraday trailing moves it up with any equity high, including unrealised.
- The same trades can pass under static, be tight under EOD, and fail under intraday trailing.
- Under intraday trailing, open profit given back raises the line permanently; runners and breakeven stops become costly.
- Most trails lock at the starting balance; reaching the lock is the first objective on a trailing account.
See it drawn
Original diagrams for the ideas on this page. Illustrative, not real market data.