Trailing Drawdown Explained: Rules & Examples (2026)

Trailing drawdown is a moving account-loss floor that follows profits upward according to a defined rule and normally does not move back down after losses. The crucial details are what moves the floor—balance or equity—when it updates, and whether it eventually locks.

Reviewed 17 September 2026 against the current MyFundedCapital plan comparison and help centre. Always verify the live rule for your exact program and account stage.

Trailing drawdown: the short answer

Assume a $100,000 account has a $10,000 trailing allowance. If the relevant high-water mark becomes $104,000, a simple trailing floor becomes $94,000. If the account later falls, the floor normally stays at $94,000 rather than moving back down.

Trailing floor = applicable high-water mark − allowed drawdown amount

That simple formula is only a starting point. The agreement must define the high-water mark, update time, included costs, lock point and breach condition. A 10% trailing rule based on closed end-of-day balance behaves differently from a 10% rule following intraday equity.

How to calculate a trailing drawdown floor

1. Find the allowed amount or percentage. A percentage may be based on starting balance, current balance or another stated reference.
2. Identify the high-water mark. Confirm whether it is balance, equity, end-of-day closed balance or an intraday peak.
3. Subtract the allowance. This produces the current loss floor.
4. Apply any lock point. Some floors stop trailing at the starting balance or another threshold.
5. Compare live equity with the floor. Include open P/L, commissions, swaps and other adjustments when the rule does.

Worked end-of-day example

The floor rose after profitable end-of-day balances and did not fall after Day 2. If the program locks the floor at the starting balance, it would stop rising once it reached $100,000. If it follows intraday equity instead, a temporary unrealised peak could move the floor before the session closes.

End-of-day versus intraday trailing drawdown

End-of-day trailing

The reference updates at a stated session close, commonly using closed balance. Intraday profit that disappears before the update may not raise the next floor. Open losses can still cause a breach if the live breach test uses equity, so “end-of-day trailing” does not automatically mean intraday losses are ignored.

Intraday trailing

The high-water mark can update in real time. A profitable open trade may raise the floor, and a later reversal can then breach it. This structure requires tighter awareness of unrealised profit and correlated exposure.

Balance versus equity

Balance changes when trades close. Equity includes open profit and loss. A balance-based high-water mark is generally less reactive than an equity peak, but the separate breach check may still be based on equity. Read both definitions in the rule.

Trailing versus static maximum drawdown

For the broader performance formula and static-rule examples, read maximum drawdown explained.

How trailing drawdown works at MyFundedCapital

MFC has multiple program models; it is inaccurate to describe all of them as one 10% rule. The current plan comparison shows:

• 1-Step Challenge: 10% trailing maximum drawdown and a 5% daily-loss limit.
• 2-Step Challenge: 10% static maximum drawdown and a 5% daily-loss limit.
• Instant Funding: maximum drawdown starts at 6% and tightens to 5% after +5% profit; daily loss is 3%.
• Prediction Market: 6% trailing equity drawdown and a daily limit of 3% of previous end-of-day equity.

A trader choosing between 1-Step and 2-Step should therefore compare the moving floor with the static floor, not only the number of evaluation phases. Instant Funding removes the evaluation but applies its tighter funded-stage risk framework immediately.

What happens after a payout?

A payout removes funds from the account. Do not assume the trailing floor falls by the same amount or resets. The current MFC Accounts & Payouts FAQ tells traders to inspect the post-payout limits shown in the dashboard and leave room for open risk, fees and adjustments.

Before a request, write down the proposed payout, current balance, equity, daily floor and maximum floor. Calculate the remaining cushion under the actual rule. If the dashboard does not make the effect clear, ask support to confirm it for the specific program and account.

Common trailing-drawdown mistakes

1. Treating the account label as risk capital. A “$100K account” may have only a fraction of that amount between current equity and the breach floor.
2. Using the starting balance after the floor has moved. The live high-water mark may be higher.
3. Ignoring unrealised profit. An equity-based rule can move after an open-position high.
4. Ignoring the session reset. End-of-day rules use a defined timezone and cutoff.
5. Risking the full remaining cushion. Spreads, commissions, slippage and correlated positions need a buffer.
6. Assuming a payout improves safety. The withdrawal can leave less room while the floor remains unchanged.

How to trade around a moving floor

• Check the floor before the first order. Use the dashboard value rather than yesterday’s notes.
• Set a personal daily stop. It should sit meaningfully above the contractual daily and maximum floors.
• Size from cash risk. Use the smaller remaining cushion and your stop distance in the lot size calculator.
• Cap correlated exposure. Several USD, index or crypto positions can become one trade during volatility.
• Reduce risk after the floor rises. A winning streak can move the safety net closer to the new account level.
• Model intraday equity. Backtesting only closed trades can miss temporary breaches.

Connect these calculations to a written process with the risk-management checklist.

Frequently asked questions

Does trailing drawdown ever stop moving?

Some programs lock the floor at a stated level, such as the starting balance. Others continue trailing. The lock point must be stated in the current program rule.

Can an open trade breach trailing drawdown?

Yes, when the breach test uses equity or otherwise includes unrealised losses. A balance-based update does not guarantee that open P/L is excluded from the live violation check.

Is end-of-day trailing safer than intraday trailing?

It is usually easier to model because the high-water mark updates at a defined time, but it is not automatically safer. Position size, overnight exposure, daily loss and the equity breach test still matter.

Is trailing drawdown better than static drawdown?

Neither is universally better. A static floor provides more room after growth. A trailing floor can encourage early discipline but may constrain a strategy after profitable sessions. Replay both mechanics against representative trade history.

How often should I recalculate the floor?

Check the live dashboard before every session and after any event that changes balance, equity, scaling tier or payout status. For an intraday equity trail, monitor it continuously.

Bottom line: the percentage alone does not define trailing drawdown. Identify the high-water mark, update timing, included costs, lock point and breach test. Then size every trade from the smaller of the daily and overall remaining cushions.

This article is educational and is not financial or investment advice. MFC funded accounts are simulated accounts using real market quotes unless the applicable terms expressly state otherwise. Trading involves substantial risk of loss.