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Trailing drawdown

A prop-firm loss limit that rises with your account's peak equity and never falls back, so early profits shrink your cushion for later.

With a trailing drawdown, the breach level follows your high-water mark. If the limit is $2,500 and you make $1,000, the breach level rises by $1,000 too. Some firms trail on closed balance, others on live equity (including open profit), which is far harsher. Many stop trailing once it reaches the starting balance.

It is the single most misunderstood prop rule and the one that ends most funded accounts.

Example: $50,000 account, $2,000 trailing drawdown. You run up to $53,000 intraday on an unrealized gain; the breach level is now $51,000. You close the trade at $51,500. Any further loss of $500 ends the account.

Related: static-drawdown, daily-drawdown, max-drawdown, evaluation

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

An equity curve and its drawdownAn account balance rising over a year, falling from a peak to a trough, then climbing back to the old peak.ACCOUNT EQUITY$20k$12k$8k024681012TIME (MONTHS)PEAK $16,000TROUGH $12,000DRAWDOWN−25%RECOVERY
Equity curve and drawdown. An account balance plotted month by month. The fall from the $16,000 peak to the $12,000 trough is a 25% drawdown, and the shaded area lasts until the balance climbs back to the old peak.

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