Trailing Drawdown
What is Trailing Drawdown?
A trailing drawdown is a moving loss limit that starts a set distance below your starting balance and moves up only when your account makes a new high. If your equity or balance (per your rules) drops to that limit, the rule is breached.
How Trailing Drawdown Works
- Start level Example: Start at $50,000 with a $2,000 trailing max drawdown → initial limit is $48,000.
- Trails upward Each time your account hits a new high, the limit ratchets up to stay the same distance ($2,000 in this case) below that high (the distance is your max trailing drawdown / trailing max drawdown).
- Never moves down If your account falls, the limit does not move lower; it remains at its last stepped level.
- Breach If equity/balance touches the limit (as defined by the program), you violate the rule.
Intraday vs EOD Trailing Drawdown
- Intraday trailing The limit updates from the highest intraday equity (open P/L included). It can move multiple times during the day.
- EOD trailing drawdown The limit updates once after the trading day ends, based on the end‑of‑day balance (usually closed P/L). During the day, it doesn’t move. This is what is EOD trailing drawdown in plain terms.
Example of Trailing Drawdown
- Start balance: $50,000
- Max trailing drawdown: $2,000 → initial limit $48,000
- You trade EURUSD and close a trade with $900 profit; balance reaches a new high of $50,900.
- Intraday style: Limit moves to $48,900 ($50,900 − $2,000) as soon as the high is made.
- EOD style: Limit stays $48,000 during the day; after the daily close, it steps up to $48,900.
- If later your equity falls to $48,900, the trailing drawdown is hit.
(Price context only: buying EURUSD 1.10201 and later closing higher helps set a new account high. The rule tracks account value, not the exact price.)
What to Check on Your Account
- Distance of the max trailing drawdown (e.g., $2,000).
- Whether the rule references equity or balance.
- Whether it updates intraday or EOD.
- Your current high‑water mark and the current trailing limit.
Other Glossary Terms
T
- Take Profit
A take profit (TP) is an automated order that closes a trade once the market hits your target price, helping you secure gains without constantly monitoring the charts.
- Technical Analysis
Technical analysis is a rules-based study of price charts, patterns, and indicators used to plan precise entries, exits, and risk levels by analyzing past price behavior to guide future trades.
- Trade Execution
Trade execution is the process of converting your buy or sell order into an actual filled trade at the best available price, covering everything from order placement to fill confirmation.
- Tick
A tick is the smallest possible price movement on a trading platform, representing the minimum step a price can move, helping traders set precise entries, stops, and targets.
- Trailing Stop
A trailing stop is a dynamic stop order that automatically adjusts as price moves in your favor, locking in gains and protecting profits if the market reverses.
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