Introduction

Honestly in prop trading, it is not just about making money. It is also about not losing too much. That is where drawdowns come in.

Every funded trader has to respect these rules. If you don’t understand how drawdowns work, you could blow your account without even realizing it. And trust us it happens more often than you’d think.

This article is here to help you understand the difference between static and trailing drawdown, especially as used by ThePropTrade. We will keep it real, simple, and to the point.

What is a Drawdown?

A drawdown is basically the maximum amount your account can go down before you are disqualified.

Think of it like a “danger zone.” Go past it? You are out.
Still confused? Picture a roller coaster:

Your account goes up, then down, then up again. That “dip” from the highest point to the lowest is your drawdown. In prop trading, firms put rules in place to limit how deep that dip can be.

Managing drawdowns protects both the trader and the firm. And each prop firm does it a little differently that is why knowing how your prop firm calculates it matters.

What is Static Drawdown

A static drawdown is simple: it is fixed from the moment you start trading.

At ThePropTrade, the Maximum Overall Drawdown is static. That means once it is set, it never moves no matter how well your account performs.

Example:
Let us say you start with a $100,000 account.

Your max drawdown is set at 10%. That means:

• Your hard stop is $90,000.
• Even if you grow your balance to $110,000 or more, the drawdown limit stays at $90,000.

So if your account equity ever drops below $90,000, even after making $5K or $10K in profits, your account gets disqualified.

✅ Pros:

• Super easy to calculate
• Doesn’t move around or require daily checks
• Gives a solid safety net upfront

❌ Cons:

• Does not increase with your profits
• You don’t get extra breathing room even if you are doing well

Trailing Drawdown

Now let us talk about trailing drawdown, which is a bit more active.
A trailing drawdown adjusts based on your daily performance. The more your balance grows, the more room you have but it can also be stricter to manage.

At ThePropTrade, this logic is used for your Maximum Daily Drawdown and it is balance-based and recalculates daily at 17:00 EST.

Example:

• Yesterday’s balance: $101,500
• Daily Drawdown: 5%
• 5% of 101,500 = $5,075

That means today, you can’t lose more than $5,075 including closed trades and floating losses.
If you go past that, even for a minute? Your account is done.And tomorrow, the drawdown resets again at 5% of the new balance. That is how it “trails” your performance always keeping up with your latest progress.

✅ Pros:

• Adjusts upward as you grow
• Encourages stable, profitable trading
• Gives more room if you’re doing well

❌ Cons:

• You need to check it every single day
• Riskier if you don’t track floating losses
• A sharp loss after a big win can cost you the account

Key Differences Between Static and Trailing Drawdowns

Practical Implications for Traders in 2025

Understanding how drawdowns work can be the difference between getting funded and getting disqualified.

Prop firms like ThePropTrade now combine both static and trailing logic:

• Static Drawdown keeps you grounded and gives you a clear loss limit
• Daily Trailing Drawdown ensures you're not reckless on any one day

Tips for Traders:

• Always check your previous day’s balance before trading
• Know your daily loss limit including floating losses
• Use a spreadsheet or tool to monitor DD each morning
• Trade smaller when close to your drawdown no revenge trading!

Visual Comparison & Examples

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Conclusion

So, to sum it up:

• Static Drawdown = One fixed limit. Easy to understand, doesn’t adjust.
• Trailing Drawdown = Changes daily, based on your balance. More flexible, but riskier if unmanaged.

At ThePropTrade, you will face both:

• A static 10% overall drawdown
• A 5% trailing daily drawdown, updated daily at 5 PM EST

Understand both. Track both. Trade within both.

If you are serious about getting funded and staying funded know your drawdowns before you even take your first trade.

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