Does trailing drawdown include unrealized profit?

Yes, in most trailing drawdown accounts unrealized profit moves your floor. The moment an open trade ticks into the green, the line that fails your account climbs with it, and it does not come back down when the trade does.

That's the whole answer. The rest of this page is the arithmetic, because the arithmetic is where accounts die.

The two models, side by side

Two accounts, same starting balance of 50,000 and the same 2,000 trailing drawdown. The floor starts at 48,000 for both.

You open a trade. It runs 1,200 into the green. You don't take it. It comes back to your entry and you close flat.

Intraday trailing (equity based). The peak the firm recorded is 51,200, because unrealized profit counts. Your floor moved to 49,200. You closed flat, so your balance is still 50,000, and your buffer is now 800.

End-of-day trailing (balance based). The firm only looks at closing balances. Nothing closed above 50,000, so the floor stays at 48,000 and your buffer is still 2,000.

Same trade. Same result on your statement. One account has 800 left before it fails, the other has 2,000.

Why this costs more than it looks

A 1,200 dollar buffer is most of your room to be wrong.

Say your normal risk is 400 per trade. On the end-of-day account you can take five losers in a row and survive. On the intraday account you can take two. Your strategy did not change, your position size did not change, and your tolerance for a bad streak just dropped by 60%.

It gets worse with scaling out. Every time a runner goes deep into profit before you trim it, the intraday floor books that peak. You are effectively paying for profit you never collected, in buffer.

The three questions that decide your number

The words in the agreement matter more than the number next to them. A "2,000 trailing drawdown" means two different things depending on these answers.

1. Does it trail on equity or on closed balance? Equity means open profit counts and the floor moves while you're in the trade. Closed balance means only settled trades move it.

2. Does it trail intraday or only at the daily close? Some firms record the highest equity point of the session. Others take one snapshot when the day ends. A trade that spikes and retraces inside the same session is free under the second rule and expensive under the first.

3. Does the floor freeze? Many programs stop trailing once the floor reaches your starting balance. If yours does, your risk of ruin falls sharply after your first real gain, because from then on the floor stands still while your balance can keep climbing. If it never freezes, the floor follows you forever and your buffer stays roughly constant no matter how well you do.

Read those three answers out of your own agreement before you size your next position. They are rarely on the dashboard. Our trailing drawdown check walks through the same three questions and gives you the buffer number that follows from your answers.

The only number worth watching

Buffer = current balance minus current floor.

That distance, between where you are and the line that ends the account, is the number that governs your position size. Profit and percentage return describe the past; the buffer decides what you can still survive.

A new equity high does not enlarge the buffer on a trailing account, because the floor climbs with it. That's the part that surprises people who came from a fixed drawdown: doing well feels like it should buy you room, and on a trailing account it doesn't.

Write the buffer down at the start of each session and size from it, not from the account balance. If your buffer is 800 and your normal risk is 400, you are two trades from the end, and that follows from the arithmetic rather than from how the week felt.

What to log so you can see it coming

Most journals record entry, exit and result. On a trailing account you want two more fields per trade:

• Maximum favorable excursion, the best unrealized point the trade reached. On an equity-trailing account that number, not your exit, is what moved the floor.
• Buffer at entry, so you can look back and see whether you were sizing from room you actually had.

After thirty trades you can answer a question most traders never get to ask: how much buffer did open profit cost me, compared with the profit I actually banked? If the first number is larger than the second, the fix is taking partials earlier, and you'll have the data to prove it rather than a feeling.

You can track both in any journal that lets you add custom fields, including ours, alongside your R-multiples.

Short version

Unrealized profit counts on most trailing accounts, and the floor it lifts does not come back down. Check whether yours trails on equity or balance, intraday or at the close, and whether it freezes at breakeven. Then watch the buffer instead of the balance.