Definition
What is Trailing drawdown?
A trailing drawdown is a maximum loss level that follows your account’s highest balance upwards, so the floor rises as you make profit.
With a trailing drawdown the account floor is not fixed. It starts a set distance below the initial balance and moves up every time the account reaches a new high. It never moves down.
Most firms stop the trailing once the floor reaches the starting balance. From that point it behaves like a fixed floor.
The practical effect is that giving back open profit costs you room. Traders who scale out of winners, move stops to break-even and avoid letting big gains turn into losses usually handle trailing limits well.
Example
A $100,000 account with a 6% trailing limit starts with a floor at $94,000. After a peak of $103,000 the floor is $97,000; after a peak of $106,000 it stops at $100,000.
At a prop firm
At Axora Funded the 1-Step uses a 6% trailing maximum loss that locks at the initial balance; futures use an intraday trailing drawdown. The 2-Step uses a static 8% instead.
Frequently asked questions
Is trailing drawdown harder than static?
Usually yes, because the floor gets closer after you make profit. It suits traders who protect their gains.
Does the trailing drawdown ever stop?
At Axora Funded it stops rising once it reaches the initial balance.