Static Drawdown vs Trailing Drawdown: What Prop Firm Traders Must Know
Most traders fail prop firm evaluations because they don’t understand the difference between static drawdown and trailing drawdown. These two rules control the account’s survival. Blow one, and the evaluation is over — even if your P/L looked good at the time.
The Core Difference
Here’s the blunt version:
- Static Drawdown — the limit never moves.
- Trailing Drawdown — the limit follows your equity upward until it locks.
Trailing is harder. Static is easier. Most eval accounts use trailing because it filters out weak traders faster.
Static Drawdown Explained
A static drawdown stays at one fixed level below your starting balance.
Example on a $50K account:
- Start: $50,000
- Static drawdown: $2,500
- Violation level: $47,500
No matter how much you earn, the line never moves. You can make $10,000 or $100 — the drawdown limit stays exactly $47,500.
Advantages of static drawdown:
- You can stack unrealized P/L without risking the trailing moving up
- Better for swing traders
- Good for slow, steady growth
Disadvantages:
- Usually offered only in the funded stage, not evaluations
Static drawdown is the “real funded” perk most traders want.
Trailing Drawdown Explained
A trailing drawdown follows your account equity upward until it reaches your starting balance. Then it stops.
Same $50K example:
- Start: $50,000
- Trailing drawdown: $2,500
- Initial violation line: $47,500
If you make winnings:
- Your equity goes to $51,000
- Your trailing drawdown moves to $48,500
This continues until the drawdown reaches the starting balance (e.g., $50K). After that, it becomes “static.”
The Trailing Drawdown Trap
Trailing drawdown punishes you for running large open P/L then letting it pull back. This is the #1 reason people fail evaluations.
Example:
- You’re up $1,200 on an open ES trade
- Your trailing limit moves up accordingly
- You let the trade pull back $900
You didn’t break daily loss. You didn’t break max size. You didn’t break rules. But you still violated trailing drawdown. Brutal, but real.
Static vs Trailing Drawdown Side-by-Side
| Feature | Static | Trailing |
|---|---|---|
| Moves with equity? | No | Yes |
| Harder to violate? | Yes | No |
| Swing trading friendly? | Yes | No |
| Common in evals? | Rare | Very common |
| Best for beginners? | Yes | No |
Why Prop Firms Prefer Trailing Drawdown
It protects the firm in two ways:
- Prevents traders from letting big winners turn into large drawdowns
- Filters out impulsive traders faster
Trailing drawdown is harsh, but it’s predictable once you understand its mechanics.
How to Avoid Trailing Drawdown Violations
- Lock profits quickly when the trailing gets close
- Avoid huge unrealized swings
- Use tighter risk management when in profit
- Don’t let winners pull back dramatically
This pairs well with rules explained in account size selection, since smaller accounts choke your room to breathe.
Final Takeaway
Static drawdown is friendly. Trailing drawdown is unforgiving. Know which one your evaluation uses before placing a single trade, or you’ll fail from mechanics alone — not from bad strategy.