Prop Firm Trailing Drawdown Explained

Trailing drawdown is a loss limit that follows your highest balance upward. As your account grows, the floor you can't drop below rises with it. The trap is that it never moves back down, so you can breach an account while still sitting on profit.

It's the single most misunderstood rule in prop trading, and it fails more traders than bad strategy ever does.

How trailing drawdown works, with real numbers

You start with $100,000 and a $3,000 trailing drawdown. Your floor starts at $97,000.

Quick Calculator

Use the interactive calculator below to run your own numbers instantly.

You make $2,000 in profits. Your peak balance is now $102,000. Your new floor: $102,000 − $3,000 = $99,000. You cannot drop below $99,000, not the $97,000 you started with.

Now you give back $2,500 of an open trade. Your balance falls to $99,500. You're still up $1,500 on the account overall. But your floor is $99,000, and you're $500 away from a breach, on an account that's in profit.

That's the part that catches people. The drawdown trailed up to lock in $99,000 and never trailed back down. Your green account is one bad session from closed.

Trailing on balance vs trailing on equity, the worse version

There are two flavors, and one is far more dangerous.

Trailing on closed balance updates the floor only when you close a trade and bank the profit. Manageable, because you control when it moves.

Trailing on equity updates the floor on your highest unrealized balance, intraday. You're up $1,800 on an open position at 10am, the floor jumps as if you'd booked it, even though you haven't. Let that winner pull back and the floor you're now measured against was set by profit you never actually kept.

If a firm uses intraday equity trailing, a normal retracement on a winning trade can breach you. Always check which version you're trading before your first position.

Why firms use it

It caps their downside precisely. Once you've shown profit, the firm has locked in a floor that protects most of it, so a funded trader can't run the account up and then dump it back to the original starting line.

That logic is fine for the firm. The problem is it punishes exactly the trading style that makes money, letting winners run, because every new peak tightens the noose.

Static drawdown: the alternative that doesn't move

A static drawdown is fixed from your starting balance and never changes. Start at $100,000 with a $5,000 static drawdown, and your floor is $95,000 for the entire evaluation. Make $10,000, give back $9,000, you're still fine, because the floor never moved off $95,000.

You always know your exact number. You can let a trade breathe without a hidden floor creeping up behind you. For most traders, this single difference decides whether they survive a normal pullback or get cut on a winning day.

How TradersYard handles drawdown

TradersYard uses a static drawdown, full stop. Your loss limit is fixed from your starting balance and never trails your equity or your peak. No intraday surprises, no breaching while you're in profit.

That's paired with a one-step evaluation, payouts in under 4 hours, and entry from £31. If you've ever lost an account to a trailing floor you didn't see move, a fixed limit is the structural fix, not a tighter stop, not more discipline, just a rule that behaves predictably. Start your evaluation and see the full drawdown rules before your first trade.

If your last account closed on a breach you didn't understand, our guide on what to do after a failed challenge walks through the fix.