Trailing vs static drawdown: how prop-firm rules work
Educational only, not financial advice. Simulations and backtests are models, not promises. Check every rule with your own firm.
"Max drawdown 6%" can mean three very different things. Which one your firm uses changes how much room you really have, and how you should trade.
Static drawdown: a fixed floor
The floor is set once, at your starting balance minus the max drawdown, and never moves. On a $100,000 account with a 6% static drawdown, the floor is $94,000 for the whole challenge.
This is the most forgiving type. Every dollar of profit is extra room: at $104,000 you have $10,000 of room, not $6,000. That means you can afford to keep the same risk per trade after a good run without getting closer to failing.
Trailing drawdown: the floor follows your high
With a trailing drawdown, the floor sits a fixed distance below the highest balance (or equity) you’ve reached. Make a new high and the floor moves up with it. Lose money and it stays put. So the room you have is always measured from your best point, not from your start.
Worked example, $100,000 account, $6,000 trailing drawdown:
- Start: floor $94,000.
- You make $3,000: high $103,000, floor $97,000.
- You give back $4,000: balance $99,000. The floor is still $97,000, so you have only $2,000 of room left, even though you’re just $1,000 below where you started.
Under a static rule the same trader would have $5,000 of room. That gap is why trailing drawdowns fail traders who give back profits.
End-of-day vs intraday trailing
Trailing rules differ in when the high is measured:
- End-of-day trailing updates the floor only from the balance at the daily close. A trade that runs up and comes back during the day doesn’t move it. It’s the gentler version.
- Intraday trailing updates the floor from your highest point during the day. Some firms use closed-trade balance; others use live equity, including open profit you never banked. If a trade goes $2,000 into profit and you close it at break-even, an equity-based trailing floor has still moved up by $2,000.
In every version, the breach itself is usually checked against your live equity, so an open losing trade can fail you before it closes.
The lock: when trailing stops
Many trailing rules stop trailing once the floor reaches a set level, often the starting balance. After that the floor works like a static one. In the example above, once your high reaches $106,000, the floor would lock at $100,000 and never rise further. Getting to that point early is the single biggest relief under a trailing rule, which is why some traders keep risk especially small until the lock is reached.
How to trade each type
- Static: size for your planned losing streak against the full drawdown. Profits add room, so you don’t have to cut risk after a good run.
- Trailing: plan your losing streak against the trailing distance at all times, because profits don’t add room until the lock. Banking profits by not giving them back matters more than squeezing the last bit out of a winner.
- Intraday equity trailing: be careful with wide targets. A trade that goes far into profit and reverses raises the floor without paying you. Partial exits or tighter management can help, but they change your strategy’s statistics, so test them.
Check it on your own trades
Paste your closed trades into the trailing vs static drawdown visualizer to see where each floor would have been and which rule would have stopped you. Then use the pass-odds calculator, which models static and trailing drawdowns, to see how the rule changes your odds.
Firms define these rules in their own words, and details like "balance vs equity" and the lock level vary. Always read your firm’s exact definition before you trade. Our rules comparison links to the firms’ own pages.