Trailing Drawdown Explained: How the Floor Moves With Your Profit

A trailing drawdown is a loss floor that follows your account's peak upward by a fixed distance and never moves down. With an 8% trail on $100K, the distance is $8,000: a peak of $104,000 puts the floor at $96,000.

For the basic contrast with a fixed floor, read static vs trailing drawdown first. This guide goes deeper: the four common versions of the trail, the same five days under each, and how to size trades from the room you really have.

Key takeaways

• One formula drives everything: before any lock, room equals the trail distance minus your giveback from the peak.
• Equity trails count floating profit: a balance trail only moves when trades close.
• Intraday trails move on every new high: end-of-day trails move only at the daily snapshot.
• A lock at the starting balance changes the rule: once the floor reaches it, it behaves like a static floor.
• Size from the room, not the account: 1% of $100K can be a large share of what is left.

What is a trailing drawdown in a prop firm?

A trailing drawdown is a maximum loss rule whose floor moves up with your best recorded value. If equity touches the floor, the account fails.

Formula: floor = highest recorded value minus the trail distance

The trail distance is usually a percentage of the starting balance, turned into dollars once: on $100K, 8% is $8,000 and 6% is $6,000. Turn the formula around and you get the number that matters during the trade:

Room = trail distance minus (peak minus current value)

At a new high, your room is the full $8,000. Every dollar you give back from that high costs one dollar of room, and the floor never comes back down. Under a static floor, by contrast, profit adds to your room.

At OctoFunded, the 1-Step uses an 8% trailing drawdown and Instant Funded a 6% trailing drawdown. The details below describe common versions across the industry. Check the OctoFunded program rules for exactly how each floor is calculated.

Does the trail follow equity or balance?

The trail follows either equity or balance, and the choice decides whether open trades can move your floor.

• Balance trail: the peak is your highest closed balance. Open trades do not count until you close them.
• Equity trail: the peak is your highest equity, including floating profit and loss. A trade that is up $3,000 lifts the peak even if you never close it there.

Take one overnight trade. You end day 1 with a closed balance of $102,000 and one open position showing +$1,500, so equity is $103,500.

• Under an end-of-day balance trail, the floor becomes $94,000 ($102,000 minus $8,000).
• Under an end-of-day equity trail, the floor becomes $95,500 ($103,500 minus $8,000).

If that position closes at breakeven the next morning, the equity trail keeps the $95,500 floor. You paid $1,500 of room for profit you never banked.

Does the floor move intraday or at the end of the day?

The floor moves either in real time, on every new high, or once per day at a fixed snapshot time.

• Intraday (real time): the firm watches your equity tick by tick. Each new high lifts the floor immediately. A trade that runs to +$2,400 and closes at +$900 leaves the floor where the +$2,400 put it.
• End of day: the firm records one value per day, usually at its server's daily close. Highs and lows during the session do not move the floor. Only the snapshot does.

An intraday equity trail is the strictest common version, because it captures your best tick. An end-of-day balance trail is the most forgiving.

What happens when the trail locks at the starting balance?

When the trail locks at the starting balance, the floor stops rising once it reaches the amount you started with. From that point it behaves like a static floor.

The lock is reached when the peak equals the starting balance plus the trail distance: $108,000 for an 8% trail on $100K, and $106,000 for a 6% trail. The floor then stays at $100,000.

After the lock, room is simply current equity minus $100,000, so every new dollar of profit widens your buffer. Before the lock, room can never exceed the trail distance.

Not every firm uses a lock. Without one, the floor keeps climbing above the starting balance, and an account can fail while still in profit.

How do the four versions compare on a $100K account?

The four versions can give four different answers on the same trades. Here is an illustrative 5-day path on a $100K simulated account with an 8% trail, with every position closed by the daily snapshot.

Floors are shown after each day. On day 5 the market turns and equity slides from $106,000 to an intraday low of $102,000.

• End-of-day trail, no lock: the floor is $100,500. At $102,000 there is $1,500 of room. The account survives.
• Intraday equity trail, no lock: the floor is $102,500, set by the $110,500 spike on day 3. The account fails at $102,500, while still $2,500 above where it started.
• End-of-day trail, locked: the floor is $100,000. At $102,000 there is $2,000 of room.
• Intraday equity trail, locked: the lock holds the floor at $100,000 instead of $102,500. Same $2,000 of room.

Check the room formula on the strictest version at the open of day 5. The peak is $110,500 and equity is $106,000, so the giveback is $4,500. Room is $8,000 minus $4,500, which is $3,500. That matches $106,000 minus the $102,500 floor.

The day 3 spike to $110,500 did the damage: it lifted the intraday floor $2,000 above where the closing result put it. The lock turned a failed account into one with room left.

How do you size positions under a trailing floor?

You size positions under a trailing floor by dividing your current room, not your account size, by the number of losing trades in a row you want to survive.

1. Compute today's room. Room = equity minus the current floor. Use the version your firm applies.
2. Pick a losing streak to survive. Say 5 losses in a row. Risk per trade = room divided by 5.
3. Check the daily limit. The trailing floor runs next to a daily loss limit, not instead of it. A full day of planned losses must fit inside both.
4. Convert risk into size. On a USD-quoted pair such as EURUSD, one standard lot moves about $10 per pip. Lots = risk per trade divided by (stop in pips x $10).

Here is the open of day 5 from the table, with a 20-pip stop ($200 per lot):

Compare that with a flat "1% of the account" habit: $1,000 per trade. Under the intraday trail, $1,000 is 28.6% of the $3,500 left, so about 3.5 losses in a row would end the account.

Recompute after every new high under an intraday trail, and after every daily close under an end-of-day trail. OctoFunded allows Expert Advisors and has no time limit, so an EA can run this arithmetic itself and nothing pushes you to size up near the floor.

Steady sizing also helps with consistency rules, which limit how much of your profit one day can make up.

FAQ

How is a trailing drawdown calculated?

The floor equals the highest recorded value minus the trail distance. On a $100K account with an 8% trail, the distance is $8,000, so a peak of $105,000 puts the floor at $97,000.

Is an intraday trailing drawdown stricter than an end-of-day one?

Usually yes. An intraday trail follows every new equity high, including floating profit you never banked. An end-of-day trail only moves at the daily snapshot, so intraday spikes that fade do not lift the floor.

What does it mean when a trailing drawdown locks at the starting balance?

The floor stops rising once it reaches the starting balance. After that, it behaves like a static floor and every new dollar of profit widens your room.

How much room do I have under a trailing drawdown?

Before any lock, your room equals the trail distance minus how far you are below your peak. After a lock, it equals current equity minus the starting balance.

Which trailing method does OctoFunded use?

The 1-Step uses an 8% trailing drawdown and Instant Funded a 6% trailing drawdown. Check the program rules for exactly what the floor tracks, when it updates and whether it stops.

Know where your floor is before every trade

A trailing floor is manageable when you know what it tracks, when it moves and how much room you have left. At OctoFunded, the 1-Step trails by 8% and Instant Funded by 6%, while the 2-Step uses a 10% static floor, all on simulated capital, for a one-time fee and with no time limit.

Compare the 1-Step, 2-Step and Instant rules