How Trailing Drawdown Works on Trail Accounts

Trailing drawdown is a risk limit that moves upward as your account reaches new highs. It is designed to protect the account from large pullbacks while still allowing traders to grow.

Unlike static drawdown, the trailing limit can increase as performance improves. Once it moves up, it does not move back down.

Trailing drawdown is a moving loss threshold based on your account’s peak performance.

As your balance or equity reaches a new high, the trailing drawdown level steps up. This means your allowable downside rises with your progress.

Trailing drawdown follows the higher of balance or equity.

Balance is your realized PnL after positions are closed.
Equity is your floating PnL including open positions.

Because trailing drawdown follows the higher of balance or equity, both realized and unrealized simulated profits can cause the trailing level to move.

The trailing level moves only when your account reaches a new high.

If your balance or equity hits a new peak, the trailing threshold increases.
If your balance or equity drops afterward, the trailing threshold stays where it is.
It never moves down.

This is what people mean when they say trailing drawdown locks in progress.

Trailing drawdown breaches are monitored in real time.

We use whichever is lower between balance or equity in real time to check for a breach. This means floating drawdown counts while positions are open.

Imagine your account reaches a new peak equity.
The trailing threshold will step up to reflect that new peak.

If you later take a loss and your equity drops, the trailing threshold does not step down with it.
If equity falls to or below the trailing threshold, it is a drawdown breach.

This is why Trail Accounts are performance optimized, while Static Accounts are payout optimized.