Understanding drawdown: static, trailing and daily
More challenges end on drawdown than on anything else. Understanding exactly how your firm measures it will save you more than any strategy tweak.
Static drawdown
A static limit is a fixed floor based on your starting balance. With $100,000 and a 10% limit, the account fails below $90,000 no matter how much you gained first.
This is the kindest version: each dollar of profit adds to your cushion.
Trailing drawdown
A trailing limit moves up with your highest balance. Earn $4,000 and a 6% trailing floor rises from $94,000 to $98,000. Hand that profit back and the account is gone, even though you are still above where you started.
Some firms freeze the floor once it reaches the starting balance. Each program page states the exact rule.
The daily cap
Daily loss is normally measured from the balance or equity at the start of the trading day, usually midnight on the firm's server clock rather than IST. Floating losses count, so an open trade can breach it.
Staying safe
Risk a small, fixed amount per trade (0.5–1% is typical), stop for the day after a set loss, and never let one position put the daily cap at risk. More in our passing guide.
Common questions
Which type is best?
Static gives the most room. Trailing is tougher, especially early on when you have little profit to cushion a loss.
Does the day reset at midnight IST?
Usually not. Most firms reset at midnight server time, so check this before trading.