The Complete Drawdown Guide
Static, trailing and daily drawdowns — how each is calculated and how to avoid blowing up.
Static Drawdown
Based on the initial capital: e.g. a $100K account with 10% static drawdown fails if the balance falls below $90,000. The line does not move up with profits.
Features: simple rules, trader-friendly, good for beginners and trend traders.
Trailing Drawdown
Based on the highest balance: a $100K account with a $3,000 trailing drawdown moves its line up to $107,000 once the account reaches $110,000.
Features: friendlier to profitable traders (locks in gains), but less tolerant of pullbacks — a slightly larger floating loss can trigger it. Trailing DD is common in 1-step and futures firms (Apex, TPT PRO); always calculate your safety margin before entry.
Daily Drawdown
Calculated daily, usually against the day's opening or peak balance — e.g. a 5% daily drawdown means losing more than that in a day is a breach. Cutoff times follow Eastern Time or broker time.
Tip: keep daily risk within 1/3 of the daily drawdown so a losing streak does not blow the account.
Three Common Blow-up Scenarios
- Overnight heavy positions + trailing DD: profit give-back triggers the line
- Consecutive daily losses: ignoring the daily limit blows the account in one day
- News volatility double-stop: big moves hit both stop-loss and daily DD
Countermeasures: risk ≤1% per trade, daily risk ≤1/3 of daily DD, cut size before major data.
Information compiled from public sources and subject to change — always confirm with the official website.
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