Static vs trailing drawdown in prop firms, explained

Most prop-firm accounts have a maximum loss: a level of equity the account must never touch. Where that level sits, and whether it moves, depends on the type of drawdown your firm uses. The difference changes how much risk you can take and how an EA has to track it. Firms define these rules in their own ways and change them, so check your firm’s current rulebook. The mechanics below are the common patterns.

All examples use illustrative numbers: a $100,000 account with a 10% ($10,000) maximum loss.

Static drawdown: the floor never moves

The floor is fixed at the starting balance minus the allowance: $90,000, for the life of the account. Profits move you away from it.

This is the most forgiving type: every dollar of profit is a dollar of extra room.

Trailing drawdown: the floor follows your highest point

The floor sits a fixed distance below the highest balance or equity the account has reached. When the account makes a new high, the floor rises with it. It never comes back down.

The account made $1,000 and lost $3,000 of room. When the trailing is measured on equity, even profit you never closed raises the floor. That is the trap: letting winners run and then give back their gains eats the cushion.

End-of-day trailing

Some firms only move the floor at the end of each day, based on the closing balance or equity. Intraday swings do not raise it, which is much kinder to strategies that hold through volatility.

Trailing that stops

Some firms stop trailing once the floor reaches the starting balance (or a little above it). From then on, the account behaves like a static one. Reaching that point early is a sensible first goal for a new account.

The daily limit sits on top

Most accounts also have a daily loss limit, measured from the start of each day. On any given day the binding limit is whichever floor is closer to your equity. The drawdown calculator shows both, for static and trailing accounts.

What this means for position sizing

On a static account you can size from the balance with some confidence, because profits genuinely add room. On a trailing account, size from the room left, because that is the only number that protects you. A simple rule: take half the room and divide it by the worst losing streak your strategy showed in testing.

With $7,000 of room and a tested worst streak of 8 losses, that gives about $437 at risk per trade. As the room grows, risk grows; as it shrinks, risk shrinks automatically.

1// Size from the room left above a trailing floor, not from the balance2double RiskMoney(double peak, double maxLossPct, double startBalance, int worstStreak)3{4   double floorLevel = peak - maxLossPct / 100.0 * startBalance;  // trailing floor5   double room = AccountInfoDouble(ACCOUNT_EQUITY) - floorLevel;6   if(room <= 0 || worstStreak <= 0) return 0.0;7   return room * 0.5 / worstStreak;  // half the room spread over the worst tested streak8}

What this means for an EA

• Track the right high-water mark: balance or equity, intraday or end-of-day, exactly as your firm defines it.
• Save it to disk. A restart that resets the highest point to the current equity silently moves your floor.
• Protect open profit on equity-trailing accounts, for example with a trailing stop, because unrealised gains raise the floor.
• Stop before the floor, not at it: spread and slippage on the closing orders will take the rest.

The full list of rules to enforce is in how to make an EA prop-firm compliant.