📉 Drawdown Rules

Daily drawdown

The maximum loss allowed within a single trading day, usually measured from the previous day's closing balance or equity high.

Max (overall) drawdown

The maximum loss allowed across the life of the account, from the initial or highest balance.

Fixed vs. trailing

A fixed max drawdown stays anchored to the starting balance. A trailing max drawdown rises with the account's equity high, which tightens the effective loss limit as the account becomes profitable — a detail many traders miss until it's too late.

Example

A $100K account with a 10% trailing max drawdown starts with a $90K floor. If equity peaks at $105K, the floor trails up to $94.5K, not the original $90K.