A static maximum loss sits at a fixed level: a $50,000 account with a $2,500 limit fails at $47,500, forever. A trailing drawdown moves. Every time the account reaches a new high, the failure level rises by the same amount, so the limit is always measured from the best point the account has reached.

Example

A $50,000 evaluation with a $2,500 trailing drawdown:

Event Balance Highest point Failure level
Start $50,000 $50,000 $47,500
Good week $52,000 $52,000 $49,500
Pullback $50,500 $52,000 $49,500
New high $53,000 $53,000 $50,500

After the good week the account is up $2,000, yet only $2,500 below its peak can be lost. Profits do not create room; they move the floor.

Variants

  • End-of-day trailing: the high is updated from the closing balance each day.
  • Intraday trailing: the high includes unrealized profit on open positions. A trade that runs +$1,500 and comes back to +$200 has raised the floor by $1,500. This is the strictest form and catches many futures traders.
  • Trailing until breakeven: the floor stops rising once it reaches the starting balance. After that it is static.

Which one applies is in your firm's terms; the difference decides whether letting winners run is safe.

Trading with it

  • Keep your normal drawdown well inside the limit; size so that your worst historical losing streak uses half of it.
  • Under intraday trailing, taking partial profit early protects the floor more than it costs.
  • Track the distance to the floor before each trade, not after.

In SetupBook

On a Prop account the maximum drawdown is measured from the highest closed-trade balance, which matches end-of-day style trailing. The dashboard's "Prop limits" card shows how much of it is used and warns at 80%; the trade form warns when the planned risk is larger than what is left. Unrealized peaks are not visible to SetupBook, so under intraday trailing rules keep a margin.