Trailing drawdown
A trailing drawdown is a maximum-loss floor that follows your account's equity high-water mark upward, instead of staying anchored to the starting balance.
The firm tracks the highest equity the account has reached. The breach floor sits a fixed allowance below that high-water mark and ratchets: every new equity high lifts the floor, and the floor never comes back down. Giving back profits can therefore breach an account even while it is still above its starting balance.
Details vary by firm. The harshest versions trail intraday equity, so the peak of an open winning trade raises the floor before you ever bank the profit. Softer versions trail end-of-day values only. Many firms also stop the floor once it reaches the starting balance — a breakeven lock — after which the account effectively carries a static floor at its initial size.
Example
A $100,000 account has a 10% trailing drawdown, so the floor starts at $90,000. Equity runs to $104,000: the floor rises to $94,000. Price then retraces and equity settles at $95,000 — the account survives, but with only $1,000 of room, where a static maximum drawdown would still allow $5,000. If equity later peaks at $110,000 under a breakeven lock, the floor stops rising at $100,000 rather than continuing to $100,000 plus.
Trailing rules are commonly cited as the hardest constraint for traders who hold winners through pullbacks, and they are the main structural difference between many one-step and two-step programs; see drawdown types explained for the full comparison.