Understanding Static vs Trailing Drawdown
One of the most critical factors in choosing a prop firm is understanding how they calculate drawdown limits. The difference between static (no trailing) and trailing drawdown can significantly impact your ability to maintain funded status and grow your account. Prop firms with no trailing drawdown use static drawdown, which keeps your maximum drawdown limit fixed at your starting balance.
Trailing drawdown, on the other hand, moves your drawdown limit up as your account balance increases. While this might sound beneficial at first, it actually makes it harder to maintain funded status because your limit constantly adjusts. If you reach a new equity high and then experience a temporary drawdown, you could lose your account even though you're still profitable overall.
Static drawdown provides traders with a fixed, predictable risk limit that doesn't change regardless of account performance. This makes risk management much simpler and allows traders to focus on trading rather than constantly monitoring a moving drawdown limit. As your account grows, static drawdown becomes relatively easier to maintain since the limit stays the same while your account increases.
In this comprehensive guide, we'll explore everything you need to know about static drawdown, which prop firms offer it, why it's more favorable for traders, and how to choose the best no-trailing-drawdown prop firm for your trading style.
What is Trailing Drawdown?
How Trailing Drawdown Works
Trailing drawdown is a risk management system where your maximum drawdown limit "trails" behind your highest equity point. Every time you reach a new equity high, your drawdown limit moves up proportionally. This creates a moving target that can be difficult to manage.
Trailing Drawdown Example
Starting Point:
Account: $100,000 | 10% Drawdown = $10,000 limit
Can drop to $90,000
After Profit:
Account: $110,000 | Limit moves to $11,000
Now can only drop to $99,000
The Problem:
If you drop to $100,000, you've hit the limit!
Even though you're still up from start
Why Trailing Drawdown is Problematic
- ✗Moving Target: Your limit constantly changes, making risk management unpredictable
- ✗Punishes Success: Making profits actually makes it harder to maintain funded status
- ✗No Recovery Buffer: Temporary drawdowns can close your account even if you're profitable
- ✗Psychological Pressure: Constant limit changes create stress and uncertainty
- ✗Difficult to Plan: Hard to calculate position sizes when limit keeps moving
What is Static Drawdown (No Trailing)?
How Static Drawdown Works
Static drawdown (also called fixed drawdown or no trailing drawdown) keeps your maximum drawdown limit fixed at your starting account balance. The limit never changes, regardless of how much your account grows. This provides predictable, manageable risk limits.
Static Drawdown Example
Starting Point:
Account: $100,000 | 10% Drawdown = $10,000 limit
Can drop to $90,000
After Profit:
Account: $110,000 | Limit stays at $10,000
Still can drop to $90,000
The Advantage:
You have $20,000 buffer ($110K - $90K)
Much more room for temporary drawdowns
Why Static Drawdown is Better
- ✓Fixed Target: Your limit never changes, making risk management predictable
- ✓Rewards Success: As your account grows, maintaining the limit becomes easier
- ✓Recovery Buffer: You can have temporary drawdowns without losing funded status
- ✓Less Stress: Fixed limit reduces psychological pressure
- ✓Easy to Plan: Simple to calculate position sizes with fixed limit
Static Drawdown vs Trailing Drawdown: Detailed Comparison
Static Drawdown (Favorable)
- ✓Drawdown limit stays fixed at starting balance
- ✓Limit doesn't move as account grows
- ✓Easier to manage and plan
- ✓More flexibility for recovery
- ✓Less risk of losing funded status
- ✓Better for account growth
- ✓Reduced psychological pressure
- ✓Predictable risk management
Best For: All traders, especially those who want predictable risk management, swing traders, position traders, and traders focused on long-term growth.
Trailing Drawdown (Stricter)
- ✗Drawdown limit moves up with account balance
- ✗Limit "trails" behind new equity highs
- ✗More difficult to maintain funded status
- ✗Less flexibility for recovery
- ✗Higher risk of account closure
- ✗Punishes profitable trading
- ✗Unpredictable risk management
- ✗Higher psychological stress
Best For: Experienced day traders with consistent daily performance who can manage moving limits effectively.
How Static Drawdown Works in Practice
Real-World Scenario
Let's walk through a detailed example of how static drawdown works compared to trailing drawdown:
Static Drawdown Journey
Trailing Drawdown Journey
Key Insight: With static drawdown, as your account grows to $115,000, you have a $25,000 buffer before hitting the $90,000 limit. With trailing drawdown, your limit moves to $103,500, giving you only an $11,500 buffer. Static drawdown becomes more favorable as you profit!
Benefits of Static Drawdown
- ✓Predictable Risk Management: You always know your exact drawdown limit
- ✓Recovery Flexibility: More room to recover from temporary drawdowns
- ✓Less Stress: Fixed limit reduces psychological pressure
- ✓Better for Growth: As account grows, maintaining limit becomes easier
- ✓Position Sizing: Easier to calculate position sizes with fixed limit
- ✓Long-term Focus: Allows focus on overall performance, not daily limits
When Static Drawdown Matters Most
- •Swing Trading: Holding positions for days/weeks benefits from fixed limits
- •Volatile Markets: Temporary drawdowns don't immediately threaten account
- •Account Growth: As you profit, maintaining limit becomes easier
- •Recovery Periods: More time and space to recover from losses
- •Risk Planning: Fixed limit makes long-term risk planning possible
Prop Firms With Static Drawdown (No Trailing)
The following prop firms use static drawdown instead of trailing drawdown. Always verify current rules as policies can change:
My Funded Futures
Static Drawdown | Weekend Holding Allowed
My Funded Futures uses static drawdown based on your starting account balance. Their 10% drawdown limit stays fixed throughout your challenge and funded account period. Combined with their allowance for weekend holding and no daily drawdown, this makes them ideal for swing traders who want maximum flexibility.
Take Profit Trader
Simple Rules | Static Drawdown
Take Profit Trader offers static drawdown with straightforward rules. Their drawdown limit is calculated from your starting balance and remains fixed throughout your trading journey. This, combined with their simple one-phase evaluation, makes them attractive for traders who want predictable risk management.
Static vs Trailing Drawdown Comparison Table
| Feature | Static Drawdown | Trailing Drawdown |
|---|---|---|
| Limit Calculation | Fixed at starting balance | Moves with equity highs |
| Limit Changes | Never changes | Constantly adjusts |
| Risk Management | Predictable | Unpredictable |
| Recovery Flexibility | High | Low |
| Account Growth Impact | Becomes easier | Becomes harder |
| Psychological Pressure | Low | High |
| Best For | All traders, swing traders | Experienced day traders |
Understanding Drawdown Types
Learn about the differences between static and trailing drawdown in prop trading
Frequently Asked Questions
What is trailing drawdown?
Trailing drawdown is a risk management rule where your maximum drawdown limit moves up as your account balance increases. If you reach a new equity high, the drawdown limit 'trails' behind it. For example, if you start with $100,000 and reach $110,000, your 10% drawdown limit moves from $10,000 to $11,000. This can make it harder to maintain funded status compared to static drawdown.
Which prop firms use static drawdown instead of trailing?
Several prop firms use static drawdown, which is more favorable for traders. Static drawdown means your drawdown limit stays fixed at the starting balance, making it easier to manage risk and maintain funded status. Firms like My Funded Futures, Take Profit Trader, and others offer static drawdown. Always verify the specific drawdown type with each firm.
Is static drawdown better than trailing drawdown?
Yes, static drawdown is generally more favorable for traders as it provides more flexibility, easier risk management, reduces the risk of losing funded status due to temporary drawdowns, and allows for better recovery opportunities. Your drawdown limit stays fixed regardless of account growth.
How does static drawdown work?
With static drawdown, your maximum drawdown limit is calculated once at the start based on your starting account balance and remains fixed throughout your challenge or funded account period. For example, a $100,000 account with 10% static drawdown has a fixed $10,000 limit that never changes, even if your account grows to $150,000.
Can I switch from trailing to static drawdown?
No, you cannot switch drawdown types within the same prop firm account. Each firm has a fixed drawdown calculation method. If you want static drawdown, you need to choose a prop firm that offers it from the start. Always check the firm's terms before signing up.
Related Resources
Prop Firms Guide
Complete guide to proprietary trading
No Daily Drawdown
Firms without daily drawdown limits
Balance-Based Drawdown
Understanding balance-based limits
Drawdown Calculator
Calculate your drawdown risk
How to Pass Challenges
Tips for passing prop firm evaluations
Compare Prop Firms
Side-by-side firm comparison