How trailing drawdown works
With a trailing drawdown the loss floor rises with your profit: every new equity high drags the limit upwards. On a 100,000 account with a 10% limit, reaching 106,000 moves the floor from 90,000 to 95,400. That is why the maths needs the highest balance ever reached, not the current balance.
With trailing drawdown the account's loss floor follows equity upwards and never comes back down. Understanding that mechanic is the difference between believing you have 10k of room and actually having 4k.
To go deeper into each part of this calculation: Drawdown calculator · Total drawdown · Breach
The mechanic
Floor = highest equity ever reached × (1 − limit percentage). A 100,000 account at 10%: the floor starts at 90,000. If equity touches 107,000 at any moment — even intraday, even if the position later gives it back — the floor becomes 96,300 and stays there.
The part that catches almost everyone is 'even intraday'. At many firms the high considered is equity, including floating profit. A position that reached 7,000 of profit and closed at 2,000 has already lifted the floor as if the 7,000 had been realised.
When the floor freezes
Many contracts stop trailing once equity reaches the starting balance plus the limit amount — on a 100,000 account at 10%, once it hits 110,000 the floor locks at 100,000 and behaves as a static limit from then on.
Others trail forever, meaning the account never earns permanent room: each new high tightens it again. Reading which of the two applies is mandatory before the first trade, not after the first scare.
The practical effect
Trailing inverts intuition: a very good day leaves the account tighter the next day. After a peak, the space to be wrong shrinks exactly as confidence grows — a combination that has ended plenty of profitable accounts.
The defence is to trade watching the distance to the floor rather than accumulated profit. On a trailing account those two numbers move in opposite directions.
How to track it without error
You have to record the highest equity ever reached, not just the current balance. That is precisely why the public drawdown calculator asks for that field. For continuous tracking, TCC stores the high per account and recomputes headroom at every logged result, warning before the floor is touched.