Trailing drawdown
A trailing drawdown is a prop firm loss limit that follows the account upward: the threshold is set a fixed distance below the highest balance or equity reached so far, rises as new highs are made, and never falls, so profits already taken raise the level at which the account fails.
Senzoukria · Glossary · Updated September 2026
Mechanics
The rule has three parts: a reference, a distance and an update schedule. The reference is the account's peak, the distance is the allowance, and the threshold at any time is peak minus allowance. The peak ratchets: it rises whenever the account makes a new high and stays where it is otherwise, so the threshold moves up and never back down. The account fails when balance or equity, depending on the firm, touches or crosses the threshold.
What makes trailing drawdowns differ from firm to firm is how the peak is measured. It can be updated after every closed trade, in real time including open positions, or only once at the end of each session. The three schedules produce different thresholds from the same trades.
Variants
| Real time (equity) | Highest unrealised equity | An open winner that returns to flat has raised the threshold; the account can fail without a closed loss |
|---|---|---|
| After every closed trade (balance) | Highest closed balance | Open profit does not move the threshold; closed profit does |
| End of day | Balance at session close | Intraday swings are ignored; the threshold moves once per session |
In Senzoukria
The Maximum drawdown block of the Prop firm rules form asks the questions that pin down the variant. Does your drawdown follow your open profit, with the help text: if you go +800 on an open position and then come back to zero, has your cushion dropped by 800? Then When does the limit move up, with the options Never, At the end of each session on my balance, During the session on my closed balance, After every closed trade, and In real time including open positions. A further field, The limit stops moving once I reach, records the lock, and Touching the limit exactly settles whether a touch already fails. The Prop firm simulation then applies the chosen variant to every trade. When the trades carry no MAE and MFE excursion, the engine reports that a rule following open profit cannot be settled and declines to conclude.
Reading the rule correctly
- Only new highs move the threshold. A drawdown followed by a recovery to the previous peak leaves it unchanged.
- The cushion, meaning the distance between the current account value and the threshold, shrinks with every loss and with every rally that is given back under an equity-based trail.
- Once the threshold has risen to the starting balance, most firms freeze it there; the trail then behaves like a static drawdown.
- The distance is the same figure the firm calls maximum drawdown; trailing describes the reference, not a different amount.
Related
- Static drawdown
- End-of-day drawdown
- Unrealized drawdown
- Drawdown lock
- Prop firm
- Orderflow software on prop firm accounts
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Frequently asked questions
- Can an account fail on a trailing drawdown without a losing trade?
- Yes, under a real-time equity trail. A position that reaches a large open profit sets a new peak; if the trade is then closed at break-even, the account value is unchanged but the threshold has moved up by the open profit that was given back. Enough such round trips bring the threshold to the current balance. This is the case the form's question about open profit is designed to capture.
- How does a trailing drawdown differ from a daily loss limit?
- The trail is measured from the account's peak over its whole life and never resets; the daily loss limit is measured from the start of the session and resets each day. An account can be well within its daily limit and still breach the trail, and the reverse.
- Does the trail keep moving after funding?
- At many firms it does, which is why the funded section of a rulebook must be read on its own. Some firms switch to a static or locked threshold at funding. Enter the funded-stage rule separately rather than copying the evaluation one.