Static or trailing drawdown: how each loss floor moves

Four ways a loss floor can work

• Static: opening balance minus the overall cap, for the life of the account. On $100K with a 6% cap you can never drop below $94,000.
• End-of-day trailing: the floor tracks your highest balance at the close. Swings inside the day leave it alone.
• Intraday (equity) trailing: the floor tracks your highest live equity, open profit included. A winner that pulls back shrinks your room.
• Balance trailing: the floor tracks your highest closed balance. Floating profit only matters once the trade is closed.

At many firms, futures firms especially, a trailing floor stops moving when it reaches the opening balance. From that point it behaves like a fixed floor at breakeven. Not every firm locks it, so check the terms.

Same equity curve, three outcomes

Take a made-up $100K account with a 6% overall cap. The trader rides a position to an intraday high of $105,500, hands the gain back over the following sessions, slips to $99,300 and then recovers.

On the static account the floor is never in danger. On the end-of-day account the floor follows the best close ($103,500) up to $97,500, and the dip passes safely. On the intraday account the floor chases the $105,500 high to $99,500, so the slide to $99,300 breaches it while the account is less than 1% below where it began.

Is the floor checked on balance or equity?

Next, ask what the floor is compared against. Equity counts open positions, so a floating loss can breach you before you close anything. Balance looks only at closed trades. For the daily cap, plenty of firms use whichever of the two is higher at the day's close. Firms state the basis in their terms, account by account, so read it before you buy.

Drawdown models by market

In forex and crypto, static floors lead, followed by trailing on balance or on equity. Futures accounts lean heavily on end-of-day and intraday trailing, so a futures trader should check the drawdown type before comparing prices.

Picking the right model for you

• You hold trades for days or let winners run: go static. Browse firms with static drawdown and firms suited to swing trading.
• You trade intraday and bank profit fast: end-of-day trailing works if you lock in gains before the close.
• Intraday trailing: only worth it when you exit winners quickly and the price is clearly cheaper. Assume any floating gain is room you can still lose.

For a static example, Hash Hedge uses a static floor on every account it sells. On its $100K two-step that floor sits 8% below the opening balance once phase one is behind you, wherever your equity peaks.

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Questions traders ask