Complete Guide to Drawdowns: Trailing, EOD and Static Explained
Understand the three types of drawdown in futures prop firms and how they affect your trading. The difference can cost you your account.
What is Drawdown?
Drawdown is the maximum allowed loss in your trading account. It is, without a doubt, the most important rule you must understand before starting with any prop firm. If your balance falls below the drawdown limit, you lose the account immediately.
Think of it as your "lifeline" in funded trading. Every decision you make must consider how much margin you have left before hitting that limit.
The Three Types of Drawdown
1. Trailing Drawdown (Dynamic)
Trailing Drawdown is the most common and also the most complex to understand. It moves upward as your account grows, but never goes down.
Practical example:
- You start with $50,000 and a drawdown of $2,500
- Your initial limit is $47,500
- If your balance rises to $52,000, your new limit rises to $49,500
- If you then drop to $50,000, the limit stays at $49,500
The trailing generally stops when you reach the Safety Net (more on this in another article).
Trailing Variants:
Trailing Intraday
Updates in real-time, tick by tick. Every time your balance marks a new high (even for a second), the drawdown rises. This is the strictest type.Trailing EOD (End of Day)
Only calculated at market close. This means during the day you can have floating losses without affecting your drawdown, as long as you close within the limit.EOD Advantage: You can take trades with wider stops without worrying about a temporary spike ruining your account.
2. Static Drawdown (Fixed)
Static Drawdown is the most favorable for the trader. It never moves, no matter how much your account grows.
Example:
- You start with $50,000 and a drawdown of $2,500
- Your limit will always be $47,500
- If you reach $100,000 in balance, your limit remains $47,500
This gives you much more freedom to trade once you generate profits, since you don't have to "protect" the drawdown.
Which One to Choose?
| Type | Difficulty | Best for |
|---|---|---|
| Trailing Intraday | High | Disciplined scalpers |
| Trailing EOD | Medium | Swing traders, day traders |
| Static | Low | Any style |
Our recommendation: If you're a beginner, look for accounts with EOD or Static drawdown. Trailing intraday requires impeccable risk management.
Common Mistakes
- Not considering spread and commissions - Your drawdown is calculated on the actual balance, not the theoretical one
- Trading without enough margin - Always leave a buffer between your stop and the drawdown limit
- Not understanding when the trailing stops - Each firm has specific rules
Conclusion
Drawdown is not just another rule: it is THE rule that defines whether you keep your account or lose it. Before choosing any prop firm, make sure you understand exactly what type of drawdown it offers and how it works in practice.
In our comparator you can filter by drawdown type to find the account that best suits your style.