Prop trading accounts
What is a Trailing Drawdown Limit and how does it calculate account liquidation risk based on peak intra-trade open P&L?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A trailing drawdown limit lowers the maximum allowable loss threshold as account equity rises, calculated from the highest peak balance including open unrealized P&L.
How it works
If equity falls below the trailing floor, including intra-trade peaks, the account is automatically liquidated or disabled per that firm's specific contract terms.
An example
Peak equity of $52,000 sets a new trailing floor at $50,000.
Risk & limitations
Calculation methods vary by firm; some include open P&L, others do not.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.