Trailing drawdown on prop-firm accounts: static, end-of-day and intraday — and why your room shrinks after a good week
Most traders on a challenge or funded account know their maximum loss as a single number, for example 10% of the starting balance. What is easy to miss is that the line itself may move. Depending on the account type, the maximum loss can be fixed for good, can follow the account up once a day, or can follow it up with every new high. The same week of trading can leave very different room under each of the three. Here we explain how each type behaves, with simple numbers, and what to check before trading on a new account. Rules differ by firm and by account type; always read your own.
Static maximum loss: the line never moves
With a static limit, the floor is set once from the starting balance and stays there. On a 100,000 account with a 10% limit, the floor is 90,000 on the first day and 90,000 after a month of profitable trading. A good week therefore adds room: at 106,000 the account can fall 16,000 before the rule is breached. For traders whose results arrive in uneven bursts, this is the most forgiving type.
End-of-day trailing: the line follows the account once a day
With an end-of-day trailing limit, the floor is recalculated at a fixed time each day, usually at midnight on the broker's server clock, from the highest closing balance so far. It only moves up, never down.
Example on a 100,000 account with a 10% limit:
- Day 1 closes at 103,000. From the next day, the floor is 93,000.
- Day 2 closes at 101,000. The floor stays at 93,000: it does not move down.
- Day 3 closes at 105,000. The floor rises to 95,000.
After three days the account is 5,000 above its start, yet the room to the floor is 10,000 — exactly what it was on day one. The profit has not bought any extra room. During the day itself the floor does not move, so an intraday swing does not lift it; only the closing figure counts.
Intraday trailing: the line follows every new high
With intraday trailing, the floor moves up the moment a new high is reached — sometimes on closed balance, sometimes on equity including open positions. The second case is the strictest of all: a trade that runs into profit and then comes back to break-even can still lift the floor permanently, even though the closed result is zero.
Example: the account is at 100,000 and the floor at 90,000. An open position reaches +4,000, so equity touches 104,000 and the floor rises to 94,000. The trade is then closed at break-even. The balance is back at 100,000, but the room to the floor is now only 6,000 instead of 10,000.
Why payouts can shrink the room further
On some account types a payout does not reset the floor. If the floor has trailed up to 95,000 and a payout brings the balance back down towards the starting figure, the room left can be much smaller than on the first day. Before requesting a payout, it helps to work out where the balance will be afterwards relative to the floor. Other account types issue a fresh account after a payout, which resets the floor; the terms say which applies.
A short checklist before trading a new account
- Is the maximum loss static or trailing?
- If trailing, is it updated at the end of the day or intraday, and on balance or on equity?
- At what time, on which clock, is the end of day counted?
- Does a payout reset the floor or not?
- Is there a separate consistency rule that can delay a payout after one large winning day?
Writing the answers down next to the daily loss limit, in money terms, takes five minutes and removes most surprises.
Where a daily lock fits in
A daily loss lock handles one part of this: it stops trading for the rest of the day once today's loss reaches the figure the trader sets. Our free MetaTrader 5 utility, Spectar Daily Loss Limiter, does exactly that, counting the day from the broker's server midnight and including floating losses. It does not track a trailing maximum loss, so the floor above still has to be checked by the trader, ideally with a personal daily figure set well inside the room that remains.
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