Risk Management
Trailing Drawdown
Definition
A drawdown limit that moves up (but never down) as your account balance increases, locking in profits as a new floor.
How It Works
Trailing drawdown follows your highest account balance. If you start at $100K with a $6K trailing drawdown, your floor is $94K. If your balance grows to $106K, the floor moves up to $100K.
It never moves down — only up. This means early profits reduce your effective "room to lose." Trailing drawdown is more restrictive than static drawdown because your safety margin shrinks as you make money. It's common in futures prop firms (Apex Trader Funding, Topstep).
Some firms stop trailing once you reach a certain level (e.g., when the floor reaches your starting balance).
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