Risk Academy
Trailing Drawdown Explained
Here is the sentence that surprises almost every new funded trader: a trailing drawdown does not measure your losses. It measures how much profit you give back — which is why the most dangerous day of your evaluation is the one right after your best day.
The mechanic, in one minute
A static drawdown draws one line below your starting balance and never moves it. A trailing drawdown draws that line below your highest point — and every time you make a new high, the line climbs with you. It never climbs back down. Profit raises your floor; losses never lower it.
A simple example
$50,000 account, $2,500 trailing drawdown. Your floor starts at $47,500.
Week one goes great: you run the account up to $53,000. The floor trails to $50,500 — above your starting balance.
Now a normal losing streak: −$2,600 over three days. You're at $50,400 — still up $400 lifetime — and the account is breached. You were profitable the entire time and you still failed.
With a static drawdown, the same trading would have left you $2,900 away from failure. Same trades, same market — the drawdown model was the whole difference.
The three variants (read this twice)
End-of-day trailing
The floor updates once per day from your closing balance. Intraday spikes don't count against you. The most forgiving trailing model — you can scale out of a winner without dragging the floor up mid-trade.
Intraday / unrealized trailing
The floor trails your live equity peak — including open profit you never banked. Let a winner run to +$1,500, give it back to breakeven, and your floor moved up $1,500 anyway. This model punishes exactly the behavior most strategies need: letting winners breathe.
Trailing that locks at breakeven
Some firms stop the trail once the floor reaches your starting balance (or start + a buffer). This converts into a static drawdown after your first good run — materially better for you. Firms that do this advertise it; if the FAQ doesn't say it, assume it doesn't happen.
Where traders fall
- They size positions off the account balance instead of the distance to the floor — after a good week, that distance is often half of what they think.
- They let winners run to big open profit, scratch the trade, and don't realize the floor trailed the unrealized peak (on intraday models).
- They treat 'up $400 lifetime' as safe. With a trailed floor above starting balance, small red days end accounts that never had a losing week.
- They never ask the one question that matters: does the trail ever stop?
How to check this before you buy
- Ask: EOD or intraday? Does open (unrealized) profit move the floor?
- Ask: does the floor lock at breakeven or keep trailing forever?
- Recalculate your real risk every morning: distance to floor, in dollars, for today — not the day you bought the account.
- After a strong run, size down. Your buffer is smallest exactly when your confidence is biggest — that asymmetry is the whole trap.
Who does what
Three products share the name, and one firm can sell you two of them.
- FTMO — the 2-Step maximum loss is a static 10% of initial capital, while the 1-Step is a 10% trail taken from the highest balance at 00:00 CET of any preceding day. Same firm, same website.
- Alpha Futures — trails on the end-of-day balance and explicitly not on intraday equity, so being up at noon and giving it back by the close never moves the floor. Once the balance clears the drawdown amount the floor locks and stops trailing.
- FundedNext — static on Stellar 1-Step, 2-Step and Lite; only Stellar Instant trails, at 6%.
Read from each provider's published rules on 31 August 2026. These change, and they change per account type — check the current page for the product you are buying.
Compare drawdown models across firms
Educational content only — not financial advice. Drawdown mechanics differ by firm and account type; always verify the current rulebook.