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Trailing Drawdown in Prop Trading

Trailing drawdown is one of the most misunderstood (and most commonly failed) rules in prop firm trading challenges. While many traders focus only on profit targets and daily loss limits, it’s often the drawdown rule that quietly disqualifies them — even when they’re in profit.

What Is Trailing Drawdown?

Trailing drawdown is a type of risk rule used by prop firms where your maximum allowed loss is calculated from the highest equity point your account reaches, not from your original starting balance.

In simple terms:
As your balance goes up, your allowable drawdown “trails” behind it — making the challenge harder the more you grow your profits.

For example, on a $100,000 challenge with a 5% trailing drawdown:
You grow the account to $106,000
Your max loss is now 5% of $106,000 → $5,300, meaning you must stay above $100,700 — or you fail
Even if you are technically still profitable, dropping below that trailing threshold will disqualify you
That’s why many traders are confused when they lose their challenge while still being in profit.

Trailing Drawdown vs Static Drawdown (Key Differences)

drawdown type
max loss calculated from
Get Started
difficulty level
Get Started
used in
Get Started
Static
Starting balance
Easier
2-phase challenges (e.g., DNA Funded)
Trailing
Highest achieved equity
Harder
1-phase / rapid evaluations
Static drawdown accounts keep the max loss fixed relative to your starting balance (e.g., always 5% of $100,000).

Trailing drawdown accounts move the goalposts upward as you make money — tightening your risk space and making the challenge harder to pass.

Why Prop Firms Use Trailing Drawdown

Trailing drawdown rules are not designed to help you “lock in profits” — despite what some marketing says.

They exist to:
Filter out undisciplined traders
Reward only those who can protect gains, not just make them
Make the challenge harder to pass (so fewer payouts are owed)
In other words, it’s a risk-management stress test.

How to Manage Trailing Drawdown (and Still Pass)

If you are trading a trailing drawdown prop firm account:
Monitor your highest equity at all times
Tighten stop-losses aggressively once your position is in profit
Trail your stop as price moves in your favor
Set alerts so you don’t violate drawdown by accident
Aim for consistency, not one giant trade
Tip: If your goal is to get funded quickly, look for challenges that use static drawdown instead of trailing.

Which Prop Firm Challenges Use Static Drawdown?

Many reputable prop firms offer both trailing and static drawdown options.
For example, DNA Funded offers:
Program Type
Drawdown Type
Get Started
Recommended For
Get Started
2-Phase Challenge
Static
Easier to pass
Rapid Challenge
Trailing
Experienced traders only
If you're looking for a fair shot at getting funded, consider starting with a static drawdown account and use a trailing drawdown challenge only once you're experienced with risk management and stop-loss trailing.

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Key Takeaways

Trailing drawdown tracks your high-water mark and tightens your max loss as you make profit
It’s harder than static drawdown and disqualifies many otherwise profitable traders
To beat it: trail your stop-loss quickly, watch your equity peaks, and use alerts
Whenever possible, choose static drawdown challenges (easier to manage and better for passing)

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Trailing Drawdown in Prop Firm Trading Explained: How to Master It

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Leveraged trading in foreign currency contracts or other off-exchange products on margin carries a high level of risk and is not suitable for everyone. You may lose more than you invest. Price and performance data is provided for informational purposes only and is not investment advice. Past performance is not indicative of future results.

There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
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