Understand how static, trailing, and EOD drawdown rules work and how “locks” and rule timing can make or break your funding challenge.
Drawdown Rules Explained: Trailing, Static, EOD & Locks
Every prop firm enforces some kind of drawdown rule. But the differences — static, trailing, end-of-day (EOD), and drawdown locks — matter enormously for your risk management and your ability to stay funded. Here’s a breakdown.
Static Drawdown (Fixed Limit)
Static drawdown means your maximum allowed loss is fixed from the start, regardless of how much profit you make. For example, if you have a 100,000 account and a 5% static drawdown, your stop-out remains at 95,000 even if your account grows. This rule is simpler and more forgiving in many ways.
Trailing Drawdown (Dynamic Limit)
With a trailing drawdown, your allowed loss moves up with your equity. If your balance peaks, the drawdown threshold follows behind. But it never moves downward. So as you make profit, your buffer tightens.
There are two main flavors:
- Intraday Trailing — updates in real time using equity, making it more aggressive
- EOD Trailing — updates once per day based on closed profits, more forgiving for intraday swings
EOD Drawdown
An EOD drawdown rule resets the check at the close of each trading day. You may see intra-day losses, but as long as your end-of-day balance remains above the threshold, you’re safe. This gives greater intra-day flexibility.
Drawdown Locks & Profit Locks
A drawdown lock (or profit lock) prevents further tightening of your trailing limit once you hit a certain profit milestone. It “freezes” your buffer so gains can’t be used to raise the drawdown to unreasonable levels. Many firms use locks as safety mechanisms.
How These Rules Impact Your Strategy
Static gives you consistent breathing room; trailing pressures you to lock in gains and trade clean. EOD suits intraday and swing styles better since it allows volatility. Understand how your firm treats open positions, equity vs balance calculations, and whether locks apply.
FAQs
How do intraday vs EOD trailing drawdowns differ?
Intraday updates in real time using equity (including floating P&L). EOD only updates at end of day based on closed P&L. Intraday is harsher in volatile sessions.
Why do firms use drawdown locks?
Locks stop further tightening of the drawdown after certain profit levels, making your buffer more stable and protecting gains. This is common in instant funding accounts.
Which drawdown type is easiest to manage?
Static is usually the easiest, because it never changes. Many new traders prefer it before transitioning to more complex trailing models.
Will drawdown rules break my strategy?
They can if your strategy doesn’t align. If you hold big positions or let profits run, you risk violating a trailing limit. Always simulate your strategy under your firm’s rules.
