The 4 Drawdown Types Explained

Based on initial capital: a $100K account with 10% static DD cannot drop below $90,000.

• The line does not move up with profits — most forgiving
• Good for beginners and trend traders

Based on the highest balance; the line moves up with profits.

• E.g. a $3,000 trailing DD moves the line to $107,000 once the account hits $110,000
• Locks in gains but punishes floating losses
• Common in futures firms and 1-step evals

• Daily drawdown: based on the day's opening or peak balance, e.g. 5% daily
• EOD: calculated on the closing balance; intraday overshoots allowed

Tip: keep daily risk within 1/3 of the daily DD and cut size before big data.