Trailing Drawdown
A drawdown that follows your equity high: the more you make, the higher the failure threshold rises.
Trailing drawdown recalculates at each new equity peak (sometimes intraday, sometimes at close). It protects the firm's gains but traps beginners: an unsecured winning trade can lift your threshold and fail you on a simple pullback.
In depth
The trailing drawdown is a variant of the maximum drawdown that rises with your gains. Your loss threshold doesn't stay fixed: it resets below your account high. Make $1,000, and your buffer moves up by $1,000. The advertised upside: it 'protects' part of your gains. The trap: it shrinks your buffer as you progress.
The subtlety that traps most: many firms compute trailing on equity, so including your unrealized (open) gains. A trade that rises to +$800 then returns to zero can permanently lift your threshold, and make you hit the drawdown while your balance hasn't moved. Knowing whether trailing follows balance or equity changes everything.
In practice, on an equity-trailing account, lock in part of your unrealized gains rather than letting a trade rise then fall back: that move is what 'freezes' your threshold at the high. Many firms stop the trailing once a certain profit is reached: find that level.
An unrealized +$800 lifts your threshold; price comes back and you hit the drawdown without 'losing'.
Believing trailing only moves on realized gains. On many firms it also follows unrealized gains: letting a trade run to +$800 then watching it return to zero can lift your threshold and take you out, without you having 'lost' on paper.
Frequently asked
Does trailing follow unrealized gains?
Often yes, on equity: the threshold rises as soon as your account makes a new intraday high, open positions included. It's the most important thing to check, as it changes the account's behavior.
Does trailing ever freeze?
At many firms, yes: once a certain profit is reached (often at the initial balance level), the threshold stops following and becomes fixed. The exact level varies by firm.
How to avoid hitting a trailing by mistake?
Understand whether it follows balance or equity, avoid letting large unrealized gains evaporate, and know the freeze level. The mechanics matter more than the advertised number.
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