In short. A static drawdown is measured from the starting balance: the loss limit stays put. A trailing drawdown is measured from the account high: the limit moves up with profit. At the same percentage the trailing one is stricter — it forces you to protect what you have already made. How exactly the limit works is in each prop firm's rules; read them word for word before a challenge.
Static drawdown
Limit = starting balance × (1 − limit %). A $100,000 account with a 10% limit has a floor of $90,000 for good. Make $8,000 and the floor is $18,000 away: profit adds a cushion. How to measure the drawdown itself, from the peak and on equity, is covered in «How to calculate account drawdown».
Trailing drawdown
Limit = account high × (1 − limit %), and it moves up with every new high. A $100,000 account with a 6% limit: at the start the floor is $94,000; after growing to $104,000 it is $97,760. Give back 6% from the peak and the challenge fails, even if the account is still in profit.
Variations you will meet in the rules:
- Balance or equity. If the high is measured on equity, it includes the floating profit of an open position: gains you did not lock in and then gave back still raise the floor.
- Stopping at the start. In some rules the trailing limit stops moving once the floor reaches the starting balance.
- Daily limit — a separate rule: a floor for one day, from the balance or equity at the start of the day.
One example, two rules
| Account | Static 10% | Trailing 6% from the peak |
|---|---|---|
| Start $100,000 | floor $90,000 | floor $94,000 |
| Grows to $104,000 | floor $90,000, cushion $14,000 | floor $97,760, cushion $6,240 |
| Pulls back to $98,000 | fine, cushion $8,000 | fine, cushion $240 |
On equity: floating profit raises the floor too
A $100,000 account with a 6% trailing limit. An open position grows to +$3,000 (equity $103,000) and closes at +$500. If the high is measured on balance, it is $100,500: floor $94,470, cushion $6,030. If on equity, it is $103,000: floor $96,820, cushion $3,680. The $2,500 of floating profit given back cost $2,350 of cushion.
What to check in the rules
- From the start or from the high — the difference is in the table above.
- Balance or equity — the example above.
- A percentage of the peak or a fixed amount. 6% of a $104,000 peak puts the floor at $97,760; a fixed $6,000 below the peak puts it at $98,000.
- Where the trailing stops. If the floor locks at the starting balance, with 6% of the peak this happens at a high of ≈ $106,383 (100,000 / 0.94), with $6,000 — at $106,000. From there the floor is static.
- The base of the daily limit and when the day starts. 5% of the initial balance is $5,000: a day that starts at $103,000 has a floor of $98,000; 5% of equity at the start of the day gives $97,850. The day may start by the firm's server time, not yours.
How the drawdown behaves across trading styles
- Scalping and intraday: positions are short, floating profit is small, and the gap between balance and equity is narrow — risk per trade decides.
- Trend following: a large floating profit, partly given back, lifts an equity-based floor, as in the example above.
- An averaging grid: the floating loss of its legs shows only in equity, so an equity-based limit triggers while the balance is still growing.
Trading with a trailing drawdown
- Lower risk per trade. The cushion barely grows after a gain, so a losing streak is more dangerous. Compare in the risk of ruin calculator: «from the capital peak» is a trailing floor, «from the starting balance» a static one.
- Count the cushion in trades. At the start of a 6% trailing limit with 1% risk ($1,000), the cushion is 6 losses in a row, and at a 45% win rate such a streak happens at least once in 100 trades with a probability of about 73%. After growing to $104,000 and pulling back to $98,000, the $240 cushion is smaller than even a 0.25% risk ($250).
- Lock in profit. If the floor follows equity, a big floating gain given back cuts the cushion just like a loss.
- Your own limit tighter than the firm's. Stopping 1–2% before the floor is cheaper than failing the phase. Which risk per trade fits the limits is in «How to pass a prop firm challenge».
What Davinchu shows
In Davinchu prop account settings you set the phase, target and daily and overall loss limits; the «Prop account» block on the account page shows progress from the initial balance — i.e. a static drawdown on equity, with daily loss counted from midnight in your time zone. For a trailing floor there is the «Max drawdown, %» rule in the MT5 risk manager (the T-Manager version for MT4 is in development): it is measured from peak equity adjusted for deposits and withdrawals and behaves like a trailing limit — when it is reached, T-Manager closes new entries through its panel and leaves open positions as they are. For a daily limit the same risk manager has the «Daily stop-loss, %» rule: the day's loss is closed trades plus the change in floating P&L since 00:00 in the time zone of the risk manager's «Trading hours» block (UTC if it is not set), as a percentage of the balance at the start of the day; once it is reached, new entries are blocked until 00:00. More on prop limits in «Prop firm risk management».