1. What it is
A trailing drawdown is a threshold a funded account must not touch, set at a fixed distance below the account's highest balance so far. As the balance rises, the threshold rises with it; when the balance falls, the threshold stays where it was.
2. How it is computed
The threshold is the peak balance minus the maximum drawdown amount. The room you have is the current balance minus that threshold.
Firms differ on three things, and all three change the number:
Whether the peak is the highest intraday equity or the highest end-of-day balance. Intraday is stricter — an unrealised profit you never took still moves the threshold.
Whether the trailing stops at some point. Many firms freeze the threshold once it reaches the starting balance, or the starting balance plus a small amount.
And whether a separate daily loss limit applies on top.
3. What it rests on
The firm's need to cap its own exposure. It is not a risk-management tool designed for the trader; it is a condition of the arrangement.
That matters for how you treat it. A rule that exists to protect someone else will not line up neatly with what is good for your trading, and pretending otherwise leads to decisions that serve the rule rather than the method.
4. Where it is wrong
The trap is not that it exists. It is that it works against the intuition most people bring to it.
After a good day you feel you have more room. You have less in relative terms: the floor came up with you, and your balance can still fall back toward it. The account label — fifty thousand, a hundred thousand — says nothing about how much you can lose today.
Public summaries of firm rules contradict each other, and the programmes change. Two sources on the same firm's same product will give different drawdown figures. The only reliable number is the one in your own account.
And intraday trailing cannot be reconstructed from daily records. If you are calculating your room from end-of-day balances while the firm trails intraday, your number is too generous.
5. Is there a measurement
None, and none is needed. This is a rule, not a claim about the market — it either applies to your account or it does not. What the position size calculator on this site does is work out the consequence, not test it.
Not measured yet.