Guide · 6 min read

Static vs trailing drawdown.

The single most important rule in prop trading. Understand it before you start, or risk blowing your account on a winning day.

What is drawdown?

Drawdown is the maximum amount your account can decline before you're breached (terminated). Every prop firm has a drawdown limit. The critical difference is how that limit is calculated.

There are two main types: static and trailing. They sound similar but behave very differently in practice, especially after you've made profits.

Static drawdown

Static drawdown is measured from your starting balance. It never moves. No matter how much profit you make, your stop-out level stays the same.

Example: $50,000 account, 6% static drawdown
Starting Balance$50,000
Drawdown Limit (6%)$3,000
Stop-Out Level$47,000 (always)
After +$5,000 profitBalance: $55,000
Stop-Out Still At$47,000 (unchanged)
Effective Cushion$8,000 (starting $3K + $5K profit)

The key benefit: profits increase your cushion. The more you make, the further you are from the stop-out. You'd need to lose all your profit PLUS the original drawdown to get breached.

Trailing drawdown

Trailing drawdown is measured from your peak equity. Every time your account hits a new high, the stop-out level moves up with it.

Example: $50,000 account, 6% trailing drawdown
Starting Balance$50,000
Initial Stop-Out$47,000
After +$5,000 profit (peak: $55K)Balance: $55,000
New Stop-Out$51,700 (trails up to $55K - 6%)
Effective Cushion$3,300 (always ~6% from peak)
If price retraces to $51,700BREACHED (despite being +$1,700 in profit)

The danger: you can get breached while in overall profit. If you make $5,000 and then give back $3,300, your account is terminated even though you're still up $1,700 from where you started.

Side by side

Static Drawdown

  • Stop-out never moves
  • Profits increase your buffer
  • Can't breach the max drawdown while in overall profit (a daily loss limit still applies)
  • More forgiving after winning streaks
  • Simpler to track mentally

Trailing Drawdown

  • Stop-out follows your peak equity
  • Cushion stays the same regardless of profit
  • Can breach while in overall profit
  • Punishes retracements after winning
  • Requires constant awareness of high-water mark

Real-world scenario

Imagine you're a swing trader who catches a big move on Monday, making $4,000 on your $50K account. On Wednesday, the market reverses and you give back $3,500 before cutting the position.

Same trader, same trades, different outcomes
Starting Balance$50,000
Monday P&L+$4,000
Wednesday P&L-$3,500
Net P&L+$500
Static DD ResultSAFE (balance $50,500, stop-out $47,000)
Trailing DD ResultBREACHED (peak $54K, 6% trail = $50,760, balance $50,500)

Same trader. Same trades. Same net profit of $500. With static drawdown, you're safely in profit. With trailing drawdown, you're breached and terminated.

Which firms use which?

Most prop firms default to trailing drawdown because it reduces their risk. Fewer firms offer static drawdown as a standard feature:

  • Static drawdown: FTMO (from initial balance), FundedNext (CFD accounts)
  • Trailing drawdown: Topstep (EOD trailing), Apex Trader Funding (EOD or intraday), FundedNext (Futures accounts)

Firms change their rules, and one firm can use different drawdown types on different programmes, so always check the current rules of the exact account you are buying. Some firms offer static drawdown as a paid add-on to the evaluation fee.

Current Mizora programme details, including how its loss limits are measured, are on the Mizora Flip page.

The verdict

If you're choosing between two otherwise similar firms, always pick static drawdown. It's more forgiving, simpler to manage, and doesn't punish you for making profits. Trailing drawdown adds a hidden layer of risk that catches many traders off-guard.

Further reading

Know the rules before you trade.

Mizora Flip is a new programme from Mizora Labs. The Flip page has its current details, including whether entries are open.

Explore Mizora Flip