Three variants exist and firms rarely name which they use. Intraday trailing follows your equity tick by tick, including unrealised profit — the harshest version. End-of-day trailing only moves the level once the session closes, which is materially easier to trade. Trailing until initial balance stops following once the level reaches your starting balance, which is the most forgiving and increasingly common on futures accounts.
Trailing drawdown
Risk rules
A loss limit that follows your highest equity instead of staying at your starting balance. Every new profit high raises the level at which the account is closed, so unrealised gains permanently tighten your room to lose.
Worked example
Account opens at $100,000, limit 3%
$100,000
$97,000
Good week, equity peaks at $104,200
$104,200
$101,200
Give back to $101,800 — still in profit
$101,800
$101,200
One more red day and the account closes
$101,200
BREACH
How firms apply it
What it means for your trading
Position sizing must be calculated against the distance to the current trailing level, not against the account size. Scaling out of winners protects the level; letting a position run to a large unrealised high and closing flat actively damages it. If you trade momentum with wide targets, an end-of-day trailing firm will suit you far better than an intraday one.
Which firms use it
Work this out for your account
Your real stop distance under static or trailing rules.
Related terms