Drawdown is the maximum your account may fall before it breaches. The question that decides everything is: fall from where?
Static (balance-based) drawdown
A static maximum loss is fixed from day one. On a $100,000 account with a 10% max loss, your floor is $90,000 and it never moves. Make $8,000 and your buffer grows to $18,000 — the floor stays at $90,000.
| Day | Balance | Static floor | Buffer |
|---|---|---|---|
| Start | $100,000 | $90,000 | $10,000 |
| After +$4,000 | $104,000 | $90,000 | $14,000 |
| After +$8,000 | $108,000 | $90,000 | $18,000 |
| Pullback to $101,000 | $101,000 | $90,000 | $11,000 — still safe |
Trailing drawdown — the trap
A trailing drawdown follows your balance, or in the harshest versions your highest intraday equity, upward. The same trades produce a very different outcome.
| Day | Balance | Trailing floor | Buffer |
|---|---|---|---|
| Start | $100,000 | $90,000 | $10,000 |
| After +$4,000 | $104,000 | $94,000 | $10,000 |
| After +$8,000 | $108,000 | $98,000 | $10,000 |
| Pullback to $101,000 | $101,000 | $98,000 | $3,000 — nearly breached |
The three variants, ranked
- Static / balance-based — fixed from your starting balance. Fairest. This is what FundedAxe uses on every evaluation.
- Trailing on closed balance — moves up as realised gains accumulate, usually stopping once it reaches the starting balance. Manageable.
- Trailing on intraday equity — moves with unrealised highs. Harshest: a trade that goes 3% in your favour and then closes flat can permanently raise your floor.
Why trailing drawdown breaks winning traders specifically
This is the part that is counter-intuitive. A trailing rule is roughly neutral for a trader who goes nowhere — the floor never rises because the balance never rises. It is punishing precisely for the trader who performs, because every gain pulls the floor up behind them.
The practical consequence is that your buffer is permanently fixed at the initial drawdown allowance. On a 10% trailing rule you have 10% of room on day one and 10% of room after a 20% gain. You never earn safety, no matter how well you trade — so the only way to reduce risk of ruin is to trade smaller forever.
| After a 15% gain | Static | Trailing |
|---|---|---|
| Balance | $115,000 | $115,000 |
| Floor | $90,000 | $105,000 |
| Buffer | $25,000 (21.7%) | $10,000 (8.7%) |
| Survivable losing streak at 0.5% risk | ~43 trades | ~17 trades |
How drawdown type changes your position sizing
Under a static rule you can size from your starting buffer and let gains extend it. Under a trailing rule your effective buffer never grows, so the correct risk per trade is the one that survives your worst losing streak from any point in the equity curve — usually meaning you must trade half the size you otherwise would.
- Static, 10% max, 0.5% risk: 20 consecutive losses survivable on day one, and more after any gain.
- Trailing, 10% max, 0.5% risk: 20 consecutive losses survivable on day one, and still exactly 20 after a 30% gain.
- Trailing with intraday equity tracking: fewer than 20, because unrealised highs that never became balance still moved your floor.
The intraday-equity variant, in detail
This is the harshest version and the one most often glossed over in marketing. It tracks your highest equity at any moment, including unrealised profit on an open position. A trade that runs 3% in your favour and then closes at break-even has permanently raised your floor by 3% — you were never paid that money, and you are now measured against it.
Does trailing ever stop trailing?
In the more reasonable implementations, yes. A common design has the floor trail upward only until it reaches your original starting balance, then lock there — so once you are 10% up on a 10% rule, your floor sits at break-even and stops moving. That is materially fairer than an uncapped trail, and it is worth asking about specifically rather than assuming either way.
| Variant | Floor behaviour | Fairness |
|---|---|---|
| Static / balance-based | Never moves | Best |
| Trailing, locks at starting balance | Rises to break-even, then stops | Acceptable |
| Trailing on closed balance, uncapped | Rises with every realised gain | Harsh |
| Trailing on intraday equity | Rises with unrealised highs | Harshest |
How to check before you buy
Ask exactly this: "Is the maximum loss fixed from my starting balance, or does it trail my equity? If it trails, does it track closed balance or intraday equity, and does it stop at my starting balance?" A firm that answers plainly is fine. A firm that redirects you to a marketing page has answered.
The same question applies to the daily limit, which has its own version of this distinction — see daily loss limits explained.
Static drawdown, measured from your starting balance
7% on the 1-Step path, 10% on the 2-Step, 8% on the 3-Step. It never moves upward while you are being evaluated.
Frequently asked questions
What is the difference between static and trailing drawdown?
A static drawdown is fixed from your starting balance and never moves. A trailing drawdown follows your balance or equity upward as you profit, so your buffer stays constant no matter how well you trade.
Is trailing drawdown bad?
It is significantly harder for a winning trader. Under a trailing rule, a normal pullback after a strong run can breach an account that is still profitable overall, because the floor rose with the equity.
Does FundedAxe use trailing drawdown?
Not in the evaluations. The maximum loss is static and measured from your starting balance — 7% on the 1-Step path, 10% on the 2-Step and 8% on the 3-Step. Funded accounts on the 1-Step, Instant and Pay After Pass programmes do use a trailing limit.
FundedAxe evaluations and funded accounts are simulated. Traders do not trade real client capital; rewards are paid on simulated performance under the terms of the FundedAxe trader agreement.