Glossary
What Is Trailing Drawdown
The account floor: breaking it fails the evaluation or closes the funded account at any firm. It can be static (from the starting balance) or trailing — following the balance peak at the end of the day or intraday.
How it works
There are two main ways the threshold trails: end-of-day trailing drawdown, where the threshold is recalculated once a day from the highest balance recorded at the close of each day, and intraday equity trailing, where the threshold moves in real time with any new equity high during the trading day itself, including unrealized profit on open positions.
At some firms, trailing drawdown doesn't keep climbing forever: at Topstep, for example, the threshold freezes once the account balance reaches the starting balance and stops moving with new peaks after that — which reduces the risk of accumulated profit itself creating an ever-tighter corridor for further trading.
The type of trailing drawdown changes tactics significantly: under the intraday version, a large unrealized profit during the day, even if never locked in, still pulls the threshold up, and a pullback from that intraday peak can breach the rules before the trading day even ends.
Example
On a Topstep 50K account, the Max Loss Limit is $2,000. Once the account balance climbs above the $50,000 starting balance, the loss threshold stops moving further and stays fixed at the starting balance minus that amount.
Common mistake
A common mistake is assuming trailing drawdown works the same way at every prop firm. The trailing mechanic — end-of-day balance, intraday equity, or freezing at the starting balance — differs between firms and directly shapes what trading tactics are viable.
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Related terms
Frequently asked questions
- Does trailing drawdown ever stop moving?
- At some firms, yes: at Topstep, for example, the threshold stops trailing higher once the account balance reaches the starting balance.
- Why is intraday trailing riskier than the end-of-day version?
- It reacts to any intraday equity peak in real time, including unrealized profit, so a pullback from that peak can breach the limit faster than a once-a-day recalculation would.
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