Size on the gap, not the balance
Your risk capital is the distance to the floor. After a trailing week that number can be unchanged while the balance has grown.
The floor is the constraintProp firms
The rule that ends most funded accounts.
Ask why a funded account failed and the answer is usually "a bad day". Look at the numbers and it is usually a trailing drawdown that had quietly moved up behind a good week. It is the least intuitive rule in prop trading and the one worth understanding before you pay for an evaluation.
What it actually is
A drawdown limit is a floor your account may not fall below. A static one sits where it started: a $50,000 account with a $2,000 limit has a floor of $48,000, and it stays at $48,000 no matter what you do.
A trailing drawdown moves up behind your account's high-water mark. Same $50,000 account, same $2,000 limit — but run the account to $52,000 and the floor follows to $50,000. Reach $53,000 and the floor is $51,000.
The consequence is the part people do not internalise until it happens: profit does not add to your buffer, it moves the buffer. You always have exactly $2,000 of room, no matter how well you are doing — until the trail stops, which is its own rule.
Balance $50,000Start. Floor sits at $48,000.$48,000
Balance $52,000Up $2,000. Floor has followed to $50,000.$50,000
Balance $53,000Up $3,000. Floor at $51,000 — above where you started.$51,000
Back to $50,900Still up $900 on the account. Breached anyway.Failed
That last row is the whole problem: an account that is still in profit, closed for a breach.
The two versions, and why one is much stricter
Firms trail on one of two things, and the difference is larger than it sounds.
Trailing on closed balance means the high-water mark only updates when you close a trade. Your floor moves in response to realised profit.
Trailing on unrealised equity means the high-water mark updates on every tick your open position is in profit. A trade that runs $1,200 in your favour and then comes back to break-even has raised your floor by $1,200 — and given you nothing.
That second one is the version that produces the confused support ticket. You did not make the money, you never saw it in your balance, and it still cost you buffer. It is not a bug and it is usually documented; it is just documented in a sentence that reads like a technicality until it has happened to you.
Find out which one your account uses before you trade it. If the rulebook is ambiguous, ask support in writing and keep the answer.
When the trail stops
Most firms stop the trail at some point, and where they stop it changes the character of the account completely.
The common version: the floor trails until it reaches the starting balance, then locks there. On a $50,000 account with a $2,000 trail, once you are up $2,000 the floor sits at $50,000 and stops moving. From that moment you are playing with a static limit at break-even — you cannot lose the firm's money, but everything above the start is genuinely yours to risk.
That threshold is the most important number in the whole account, because it is where the game changes from "survive a moving floor" to "do not give back the profit". Reaching it is worth more than the money it represents.
Some firms lock the trail at starting balance plus a buffer. Some never stop it. Read yours.
What it means for how you size
The practical error is sizing against the account balance when the constraint is the distance to the floor.
A $50,000 account with the floor at $48,000 does not have $50,000 of risk capital. It has $2,000 — and after a good week where the floor has trailed up, it still has $2,000, no matter what the balance says. Risking 1% of balance is $500, which is a quarter of your entire remaining room on one trade.
The fix is to size against the gap rather than the balance. Take the distance from your current equity to your current floor, decide how many consecutive losses you want to survive, and divide.
Four consecutive losers is not pessimistic — any strategy with a win rate under 70% produces four in a row regularly. On $2,000 of room that is $500 a trade absolute maximum, and something closer to $200 if you want the account to survive a genuinely bad stretch.
Count consecutive losses
Decide how many in a row the account must survive, then divide the gap by that. Four is a reasonable floor for most strategies.
Not how many you expectReaching the lock is the goal
Where the trail stops is where the account stops being fragile. Getting there matters more than the size of any single win.
Usually starting balanceThe multi-account version of the problem
Traders who pass one evaluation buy more, and each account then has its own floor at its own distance from its own equity. The same trade has a different correct size on each, and that difference changes every day as each floor trails independently.
Doing that arithmetic live across four accounts is not realistic, which is why people stop doing it and start trading them all at the same size. That works until the smallest account — the one whose floor is closest — takes the loss that ends it.
Per-account sizing is the mechanical answer: each account carries its own multiplier, applied before the order is sent, so one trade lands proportionally on each. Our position size calculator handles a single account's number; Copy Trader applies the per-account version automatically.
Whether you may mirror across a firm's accounts at all is their decision — see copy trading and prop firms.
Common questions
What is a trailing drawdown?
A minimum account balance that rises behind your account's high-water mark. If you have a $2,000 trailing drawdown, you always have roughly $2,000 of room below your peak — profit moves the floor up rather than adding to your buffer.
How is trailing drawdown calculated?
Floor = highest balance reached minus the drawdown amount. A $50,000 account with a $2,000 trail starts with a floor of $48,000; at a $53,000 peak the floor is $51,000. Whether the peak updates on closed balance or on unrealised equity depends on the firm.
Can I fail a funded account while still in profit?
Yes, and it is the most common way it happens. If your peak took the floor above your starting balance, an account that is still up on the month can breach. That is exactly what the rule is designed to do.
What is the difference between trailing on balance and on equity?
Trailing on closed balance updates the high-water mark only when you close a trade. Trailing on unrealised equity updates it on every favourable tick, so a trade that runs up and comes back to break-even raises your floor without ever paying you. The second is materially stricter.
Does the trailing drawdown ever stop?
At most firms, yes — commonly once the floor reaches your starting balance, after which it locks. That threshold is the most important number in the account, because past it you can no longer lose the firm's original capital. Some firms lock elsewhere and some never stop; check yours.
How should I size trades with a trailing drawdown?
Against the distance from your equity to the floor, not against the account balance. Decide how many consecutive losses the account must survive — four is a reasonable minimum — and divide the gap by that number.
Start on a simulated account.
Connect a sim or evaluation account and run the whole product against it before you point anything at live money. Nothing about the setup changes when you do.