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What is a trailing drawdown?

A trailing drawdown is a max-loss floor that follows your highest balance up and never moves down. With a $2,000 limit, a new high at $51,200 puts the floor at $49,200. At many firms it stops rising once it reaches a set point, often the starting balance, and stays there.

Worked example

Sample account · $50,000, $2,000 trailing max loss, floor stops at the starting balance

The floor starts $2,000 below the balance and moves up with each new closing high.

  1. Day one, before any trade

    Balance
    $50,000
    Highest close
    $50,000
    Floor
    $48,000
    Room
    $2,000

  2. Closes at a new high

    Balance
    $51,200
    Highest close
    $51,200
    Floor
    $49,200
    Room
    $2,000

  3. Gives some back the next day

    Balance
    $50,500
    Highest close
    $51,200
    Floor
    $49,200
    Room
    $1,300

    The high stays where it was, so the floor does too.

  4. Closes at a higher high

    Balance
    $52,400
    Highest close
    $52,400
    Floor
    $50,000
    Room
    $2,400

    The floor has reached the starting balance and stops rising there.

After a new high at $51,200 the floor is $49,200. Giving back $700 leaves it there and cuts the room to $1,300. At $52,400 the floor would be $50,400, but it stops at $50,000, so the room grows to $2,400.

Computed by the same rule engine your real accounts use.

What the floor does and doesn't do

It rises when the balance it tracks sets a new high, by the same amount. It never falls: a losing day after a high leaves the floor where it was, so the room above it shrinks. Once it reaches its stopping point it stays fixed, and from then on every dollar of profit is room.

How firms differ

  • Which balance the floor follows: some use the closing balance each day, others the highest equity during the day, open trades included.
  • Where it stops: some stop it at the starting balance, some a set amount above it, some never during an evaluation.
  • What happens when the account moves from evaluation to funded, or after a payout: the floor can reset or carry over.

Check your firm's current terms. Claridae's presets record each firm's version, dated, and you can edit any account's rules.

See it on a sample day

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