Forex guide · 5 min read · Updated 8 October 2026

Trailing drawdown explained

What a trailing drawdown is, how it differs from a static one, and why it catches out profitable traders. Worked examples on a £10,000 and £50,000 account.

A drawdown limit is the line a prop firm account must never fall below. There are two kinds, and the difference decides whether a normal losing run ends your account.

Static drawdown

The floor is fixed from day one. With a 10% static limit on £10,000, the account fails at £9,000. Make £1,000 and the floor is still £9,000, so you now have £2,000 of room.

Trailing drawdown

The floor follows your highest balance up. With a 6% trailing limit on £10,000, the floor starts at £9,400. Grow the account to £10,400 and the floor rises to £9,800. You have made money, yet your room is still only £600.

At most firms the floor stops rising once it reaches the starting balance. Some trail on closed balance, others on equity (including open trades), which is stricter still.

Why it catches people out

Picture a 1:3 strategy risking 1%. It wins four trades (+12%), then has a normal losing run of seven (−7%). Overall the trader is up 5%. With a 6% trailing limit the floor rose with the winning run, and the seven losses take them through it. The account fails while in profit.

How to trade with a trailing limit

• Risk less per trade: 0.25% to 0.5% instead of 1%.
• Bank early profit until the floor stops trailing at the starting balance.
• Check equity based rules before holding trades through news.

Try your own numbers with the prop firm drawdown calculator.