Trailing Drawdown
Risk ManagementA loss limit that rises with the account's equity peak rather than sitting fixed — the prop-firm rule whose variants decide how much risk is usable.
A trailing drawdown is a loss limit that moves up with an account's high-water mark instead of staying fixed to the starting balance. Where a static limit says the account may not fall below 90% of what it started with, a trailing one says it may not fall more than 10% below its highest point so far — so every new peak raises the floor and permanently removes some of the room the trader had a moment earlier.
It is met most often in proprietary-firm evaluations and funded accounts, where the details vary in ways that change the rule substantially: whether it trails on closed balance or on live equity including floating profit, whether it stops trailing once the account reaches its initial target, and whether an intraday spike counts as a new peak. Equity-based trailing is the strictest version, because unrealised profit that is handed back can breach the limit without a single losing trade ever being closed. Read which variant applies before sizing anything, since the same headline percentage can describe very different amounts of usable risk.