What Is a Trailing Drawdown on a Prop Firm Account?

A trailing drawdown is a loss line set a fixed distance beneath the best balance an account has ever recorded, which rises with the account and never retreats when the account falls back. Touch it and the account is finished; that is the whole rule, and on our programs it is the only performance rule that can end one.

Everything interesting about it is arithmetic rather than definition. The line's position on any morning is a number you can work out, the amount of room it leaves is a number you can divide by a tick value, and the point at which it stops moving is a number you can compare against the profit target you are trading toward. What follows works those calculations through, using the figures our own drawdown rule publishes, and takes no position on how any other firm sets its own.

What is a trailing drawdown?

A trailing drawdown is a hard floor under an account that travels upward behind it. Set the floor a fixed distance below the starting balance on day one; every time the account records a new best balance — on our accounts, a new best closing balance — lift the floor by the same amount so the gap stays constant. Losses never lower it. The gap is the number the program publishes as the maximum drawdown for that account size.

The word doing the work is trailing. A fixed floor forgives everything you make: earn $5,000 and then lose $5,000 and a fixed floor has not moved an inch closer. A trailing floor does the opposite. It banks your progress on your behalf and then holds you to it, so the money you have made stops being a cushion almost as fast as you make it.

That asymmetry is the source of most of the confusion about the rule. Traders read the drawdown figure as the amount they are allowed to lose, which is true only on the first day. After that it is the amount they are allowed to lose from their own high-water mark, and the high-water mark is a moving object.

What makes a trailing drawdown line move up?

Only a record closing balance moves the line on our accounts. A day that runs deep into profit and finishes where it started leaves the line exactly where it was, and so does an unrealised profit spike on a position that is still open. The line rises when the day's final figure beats every previous day's final figure, and by exactly the amount of the improvement.

This is where the realised-versus-unrealised distinction earns its keep. The CFTC's futures glossary gives the industry's name for the second category under its Open Trade Equity entry, which defines the term as the gain or loss on futures positions that are still open and therefore unrealised. Open trade equity is real enough to see on the screen and, under a closing-balance rule, invisible to the line until the trade is closed and the day ends.

The measuring moment is therefore a specific clock time rather than a vague end of session. Our accounts have a flat time of 4:45 PM ET; a position still running when it arrives gets closed on your behalf, and whatever that fill produces lands in the balance and counts toward the drawdown like any other trade. The trading day itself starts the previous evening at 6:00 PM ET on the CME session, so Sunday evening's trades belong to Monday. On a shortened holiday session the flat time moves with the early close.

Two practical consequences follow. A profit you do not close is a profit the line ignores in both directions — it does not raise the floor, and it does not protect you either. And a position you leave running toward 4:45 PM ET is a position whose closing price you are no longer choosing.

When does a trailing drawdown stop trailing?

It stops when your profit equals the drawdown amount. At that point the line has climbed the full width of the gap, arrives at the starting balance, and parks there permanently. From then on the worst outcome the rule allows is finishing where you began, which is a materially different account to trade than the one you bought.

The useful question is how far into a program that moment falls, and the answer is division. On Classic and Horizon the profit that locks the line is the drawdown figure, and the profit that passes the evaluation is the target — so the lock arrives at the ratio between them:

Figures for Classic and Horizon as published on the pricing page, read 28 September 2026; Zenith has no profit target and sets a wider drawdown on the two largest sizes.

The two ratios come from the same place: both programs set the evaluation bar at 6% of account size, while the drawdown gap is 4% of it on the smaller two and 3% on the larger two. On every size the lock therefore lands well before the finish line, and any closing balance high enough to meet the target has already crossed the balance that fixes the floor. The same holds on the funded side, where the payout buffer is the starting balance plus the drawdown plus $100. Compare that with the lock point, which is the starting balance plus the drawdown, and the buffer is exactly $100 further on. You cannot reach the balance that makes a withdrawal possible without having passed the balance that stops the line first.

How much room does a trailing drawdown leave you day to day?

While the line is still trailing, the room is constant and equal to the drawdown amount, measured from your most recent record close. It does not widen as you profit, because the line rises by whatever you add. It widens only after the lock, when the floor is frozen at the starting balance and every further dollar of profit is genuinely extra distance.

Turning that into trading terms takes two divisions. Take a $50,000 account with a $2,000 gap that closed a session at $51,200, putting the line at $49,200. The E-mini S&P 500 contract moves $12.50 a tick at four ticks to the point, so a point is $50 and $2,000 of room is 40 index points; the Micro E-mini moves $1.25 a tick, so the same room is 400 index points on the micro. Spread across the four minis a $50,000 account may hold at once, $2,000 is $500 of room per contract, or ten S&P points each before the line is reached.

Those are ceilings on total loss, not position sizes, and the difference between the two is the subject of how futures position sizing actually works. The point to carry out of the arithmetic is narrower: yesterday's room is not today's room. Every winning close moves the floor and resets the count, which is why a size that felt comfortable on Monday can be the wrong size on Friday even though nothing about the account's balance looks worse.

What is the difference between end-of-day and intraday trailing drawdown?

A trailing line has to trail something, and there are two candidates: the balance a day finishes at, or the highest equity the account touches while trades are open. Our published rule uses the first, and the help centre describes the intraday version as the stricter of the two. The arithmetic shows why.

Take an account at $50,000 with a $2,000 gap and a line at $48,000. During one session the open position runs to $900 in profit and then gives most of it back, closing the day up $100.

The $800 is the whole difference, and it is a charge for profit the trader never banked. Under a peak-equity rule, every push to a new equity high tightens the floor a little further, whether or not the profit is ever banked, and a session of giving back open profit can cost room without costing a cent of balance. Under a closing-balance rule the same session is free.

Neither arrangement is generous — both still ratchet, both still refuse to fall — and the point of laying them side by side is that the drawdown figure alone tells you very little. Two accounts advertising the same dollar gap can behave differently enough to change how you trade, and the sentence that says what the line follows matters more than the number.

Is a trailing drawdown the same as a daily loss limit?

No. A daily loss limit caps what you can lose in a single session, and our help centre describes the usual version as a soft rule rather than a breach: it shuts trading down for the rest of that day, and the account itself survives. A trailing drawdown caps what you can lose from your high-water mark and ends the account when it is reached. One is a pause, the other is the exit. No plan on sale here carries a daily loss limit at all, whether it is an evaluation, a funded account or instant funding, which leaves the drawdown as the rule that governs the account.

That combination changes where the discipline has to come from. With no daily tripwire, nothing external stops a bad session before it reaches the line, and the drawdown rule states that the line is watched live through the session rather than only at the close: a balance touching it in the middle of the afternoon liquidates the account there, and recovering before the bell does not undo that. The floor is not a warning that arrives once a day. It is a switch left armed for every second the market is open.

What happens when the line is hit?

The account stops. Breaching the maximum drawdown is the only way to fail on performance across our programs: there is no clock to beat, and no sum you are obliged to have made by any stated date. A consistency shortfall does not belong in the same category, because it holds up a payout rather than closing anything.

After that it is a commercial question rather than a trading one. A failed evaluation can be reset, which returns the account to its starting balance and begins it again at the reset price for that program and size, or replaced by buying a different one. Zenith has no resets, since there is no evaluation to repeat, so a Zenith account that breaches gets bought again instead. A funded account that breaches closes, and the way back is another evaluation at its usual price. What happens if you fail sets out all three cases.

Worth stating plainly: these are simulated accounts trading live market data, and the payouts on the profits are real money at a 90% split. The drawdown line is a risk parameter in that simulated environment rather than a margin call at a broker, and it is the parameter every other rule is arranged around.

FAQ

Does a trailing drawdown ever move back down?

No. The line moves in one direction. It rises when the account records a new best closing balance and it stays put when the account loses, which is what makes it a ratchet rather than a band. The only thing that ever stops it rising is the lock at the starting balance, which happens once profit equals the drawdown amount, and after that it does not move again in either direction.

Does unrealised profit count toward a trailing drawdown?

Not on a closing-balance rule. Profit on a position that is still open is what the CFTC glossary's Open Trade Equity entry covers, and until the position is closed and the trading day ends at the 4:45 PM ET flat time, it has not changed the balance the line is measured against. That cuts both ways: an open profit will not lift your floor, and it will not defend you either if the trade turns around before you close it.

Can the trailing drawdown lock before you pass an evaluation?

On Classic and Horizon, yes, and the arithmetic makes it the normal case. The profit that locks the line is the drawdown figure and the profit that passes is the target, and on the sizes published on our pricing page the first is between half and two thirds of the second. The lock therefore arrives partway through an evaluation rather than at the end of it, and a closing balance that meets the target has already passed it.

How is a trailing drawdown different from the payout buffer?

They are two floors doing different jobs. The drawdown line is a trading limit and hitting it closes the account. The payout buffer is a withdrawal limit — the balance a payout may not take you below — and falling under it costs you eligibility, not the account. Since the buffer is the starting balance plus the drawdown plus $100, it sits just above the balance at which the line locks.