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Enter a win rate, payoff and risk to see how often a daily or total loss limit ends a simulated challenge.
What is included
- What it is, in plain words
- The formula or mechanism, with exact arithmetic
- How it hits grid, martingale and DCA bots
- A check you can run before you switch a bot on
Who it is for
- People who run or plan to run a trading bot
- Anyone reading a backtest or a bot sales page
- Readers who want the numbers, not the pitch
- Not advice, and not a signal service
Key facts
- A trailing drawdown limit is a floor equal to the highest balance reached minus the limit. The floor rises with each new high and does not fall.
- A static limit is a fixed floor under the starting balance. The two are the same on day 0 and drift apart as soon as the account makes a new high.
- On the made-up account below the balance ends at $9,800. That is $800 above a static floor and exactly on the trailing floor, so the trailing rule ends the attempt (calculated by us on 30 Oct 2026, exact).
- Details differ by firm: some trail on closed balance and some on equity, some stop trailing at a set level. This page shows the idea, not any firm's terms.
- A bot that grows its size after gains meets a shrinking room with growing positions. Read your own firm's current terms before relying on any figure here.
What a trailing drawdown is
Every loss limit is a floor. If the account value touches it, the attempt ends. With a static limit the floor is set once, under the starting balance, and never moves. With a trailing limit the floor is set from the highest balance the account has reached, the high-water mark, and moves up each time the account makes a new high. It does not move down when the balance falls. This is the same idea as a trailing stop, applied to the whole account instead of one trade.
Room = current balance - trailing floor
Static floor = starting balance - limit
The room left at any moment is the balance minus the floor. When the balance is at a new high, a trailing limit always leaves the same room: the size of the limit. When the balance falls back from the high, the room shrinks by the same amount. In short, with a trailing limit you can lose the limit measured from your best point, not from where you started.
A worked example, day by day
Take a made-up account of $10,000 with a limit of $1,000, so the static floor is $9,000. The balances below are invented. The table shows the high-water mark, the trailing floor and the room under each rule.
| Day | Balance | High-water mark | Trailing floor | Room (trailing) | Room (static) |
|---|---|---|---|---|---|
| 0 | $10,000 | $10,000 | $9,000 | $1,000 | $1,000 |
| 1 | $10,200 | $10,200 | $9,200 | $1,000 | $1,200 |
| 2 | $10,500 | $10,500 | $9,500 | $1,000 | $1,500 |
| 3 | $10,800 | $10,800 | $9,800 | $1,000 | $1,800 |
| 4 | $10,600 | $10,800 | $9,800 | $800 | $1,600 |
| 5 | $10,300 | $10,800 | $9,800 | $500 | $1,300 |
| 6 | $10,500 | $10,800 | $9,800 | $700 | $1,500 |
| 7 | $10,100 | $10,800 | $9,800 | $300 | $1,100 |
| 8 | $9,800 | $10,800 | $9,800 | $0 | $800 |
The balance climbs to $10,800 on day 3. The trailing floor climbs with it, from $9,000 to $9,800. From then on the high-water mark stays at $10,800, so the floor stays at $9,800. By day 8 the balance has fallen to $9,800, only $1,000 below the peak, and that is exactly the floor. The trailing rule ends the attempt. The static rule would still show $800 of room.
Notice what produced the end: not a bad run from the start, but a $1,000 pullback after a gain of $800. The account was never below its starting balance by more than a small amount. In effect, a trailing limit counts a fall from a high the same as a fall from the start.
What it does to a bot that scales in
A bot that scales in makes its positions larger as it goes. That can mean raising the lot size after a gain, adding to a winning position, or adding levels as price moves. Each of these puts more money at risk at the very moment a trailing limit has raised the floor. There are two separate effects.
Effect one: bigger size, same room
Suppose the bot risks $100 a trade at the start, with $1,000 of room. It can take 10 losses in a row before the floor. Now it doubles its risk to $200 a trade after the account is up. At the peak the trailing room is still $1,000, which is only 5 losses of $200. A static limit would leave $1,800 of room, or 9 losses. The same bot, the same trades and a different rule: 5 losses against 9. Growing the size of a bot after gains and keeping the room fixed shrinks the count of losses it can survive.
Effect two: floating profit raises the floor
Some rules measure the limit on equity, which includes open trades. Then an unrealised gain counts as a new high. Take the same account at $10,000 with a position that floats $500 in profit. The equity high is $10,500, so the trailing floor rises to $9,500. If the trade then turns and is stopped $600 below its entry, equity is $9,400, which is below $9,500. The attempt ends, even though a $600 stop looked well inside a $1,000 limit and the closed balance never moved. A bot that adds to a winner makes this more likely, because each add raises both the floating profit and the size that can give it back.
How other bot types meet it
- Fixed-money risk. The count of losses it can absorb falls only if the room falls. At a new high the room is back to the full limit.
- Percent-of-balance sizing. Positions grow with the balance, so the loss count shrinks as profit builds. See position sizing.
- Martingale. Steps grow after losses while the room is smaller after gains. A ladder that fit a static limit may not fit a trailing one.
- Grid and DCA. Closed cycles bank profit and raise the floor, while the deepest levels sit the same distance away as before.
How to check a setup, and what this does not show
Work out the room at the high-water mark, not at the start: it is the limit, not the cushion you had on day 0. Divide it by the largest loss the bot can book in one move, including a ladder step or a full grid, to see how many it can take. Then repeat with equity if the rule counts open trades. A backtest drawdown from the drawdown guide is a sample, so the real worst case is deeper. The prop firm drawdown rules page covers the daily limit too.
This page does not give the terms of any firm, and it cannot say how any bot will behave. Firms differ, rules change and the exact wording matters. Read your own firm's current terms.
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FAQ
Frequently Asked Questions
What is a trailing drawdown?
A loss limit whose floor equals the highest balance reached minus the limit. It rises with each new high and does not fall back.
How is it different from a static drawdown?
A static floor is fixed under the starting balance. A trailing floor moves up with profit, so the room to lose is measured from your best point instead of your start.
Does a trailing limit count open trades?
It depends on the rule. Some measure on closed balance and some on equity. On equity, a floating gain can raise the floor before the trade is closed.
Why does scaling in make it worse?
The room stays near the size of the limit while position size grows, so the number of losses the account can take falls. Adding to a winner also raises floating profit and the amount that can be given back.
Does the floor ever stop rising?
Some rules stop it at a set level and some do not. It varies by firm and changes, so check the terms you are under.
Are the numbers on this page real?
Example numbers are made up to show how the maths works, and the page says so. A figure only counts as exact when the page says it was calculated on a stated date. Nothing you enter in a calculator leaves your browser.
Can I use this to decide whether to run a bot?
It can show whether a bot's numbers hold together and how much an account can lose. It cannot say what the market will do, and it is not advice. Use it to ask better questions, then read the terms of your own broker or exchange.
Is this financial advice?
No. It is general education about how a loss limit is measured. The numbers are made up, and it does not consider your situation.
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