The difference in one example
A 100,000-dollar account with a 10 percent limit. Under static rules the floor is 90,000, always. Grow the account to 108,000 and you have 18,000 of room. Under trailing rules on equity, reaching 108,000 moves the floor to 97,200, so a pullback of 10.8 percent from the peak ends the account even though you are 8 percent above where you started. If the 108,000 was open profit that you never banked, the floor still moved.
Who each suits
- Static: trend followers, swing traders, anyone whose winners run and whose open profit fluctuates.
- Trailing: scalpers and mean-reversion traders who take profit quickly and whose equity curve is smooth.
- Trailing to breakeven: a compromise common in futures firms; hard early, static once the account is up 10 percent.
Reading a firm's rule
Firms describe trailing drawdown under several names: relative drawdown, trailing maximum loss, end-of-day trailing. Read the definition for what the floor is measured from, whether it uses balance or equity, when it updates, and whether it locks. Then check the funded account separately; several firms trail in the evaluation and switch to static once funded.
A rule of thumb
If you cannot say in one sentence how your firm's maximum loss floor moves, you are not ready to pay for its challenge.
Trading forex, CFDs and other leveraged products carries a high risk of losing money. This guide is general education, not advice.