When does trailing drawdown stop trailing? The lock math

On many prop firm programs, a trailing drawdown stops trailing when the floor reaches your starting balance, or the starting balance plus a small fixed amount. The exact level is written in your agreement, and with 2,000 of trailing on a 50,000 account and a lock at the starting balance, it happens the first time the account reaches 52,000.

From then on the floor stands still at 50,000. Before that, each new high drags it up by the same amount.

The terms, defined

A trailing drawdown is a maximum loss limit measured from the account's high-water mark: the highest balance or equity the account has reached, depending on the agreement. The loss threshold, usually called the floor, sits a set distance below that high. When the account sets a new high, the floor moves up with it; when the account falls, the floor stays put.

A lock (agreements also say freeze, or that the drawdown stops trailing) ends the trailing at a set level. Once the floor reaches that level it stays there, and from then on the rule works like a static drawdown.

Your buffer is the distance between the account value and the floor, the line that ends the account.

Plain version: the floor follows your best balance upward at a fixed distance and never steps back down. The lock is the level where it stops following.

When the lock kicks in

The account value that triggers the lock is the lock level plus the trailing amount.

The high only has to happen once. If the account touches 52,000 and falls back to 51,200, the floor stays at 50,000 and your buffer is 1,200.

The number that has to touch 52,000 is the one your floor trails on: open equity, closed balance or the end-of-day balance. On an open-equity account, an open trade that lifts equity to 52,000 can lock the floor even if you close it lower. Does trailing drawdown include unrealized profit covers that difference.

Your buffer before and after the lock

Same account, with and without a lock at the starting balance.

Up to 52,000 the two accounts are identical. After that, every dollar of profit on the locked account adds a dollar of buffer, and at 53,000 it has 3,000 of room while the other still has 2,000.

With a lock at the starting balance plus 100, the floor stops at 50,100, so the buffer reads 2,900 at 53,000 and 3,900 at 54,000.

Why the first 2,000 are the riskiest stretch

Until the account has made its first 2,000, any losing run of 2,000 from a recorded high puts it on the floor.

After the lock, the same 2,000 run starting at 53,000 ends at 51,000, still 1,000 above the floor.

Count it in full losses. Say you risk 250 per trade. Before the lock, the buffer holds 8 full losses to the floor at most; at 53,000 on the locked account, it holds 12.

Sizing up after a good first week shrinks that count, because the buffer before the lock is still 2,000 at best: at 500 per trade, it holds 4.

(On an end-of-day account, open profit can stretch the buffer during the session. The close sets it back to 2,000 or less.)

Withdrawals take buffer back out

Once the floor is locked, anything that lowers the balance lowers the buffer dollar for dollar. A payout is the obvious case.

A 1,000 withdrawal from 53,000 puts you back at the 2,000 buffer you had before the lock. A 2,000 withdrawal leaves 1,000 of buffer, half of what the account started with.

Read the payout section together with the drawdown clause, because between them they set your buffer. A daily loss limit, if your agreement has one, keeps its own rules after the lock; does the daily loss limit include open trades covers how it's measured.

Programs that never lock

Agreements cover a range: a lock at the starting balance, a lock a small amount above it, or no lock at all. Which one you have is written in your own agreement.

Without a lock, the floor stays 2,000 below the high for as long as the account runs. Your buffer is 2,000 at every new high and smaller everywhere below it. The 53,000 row above shows the gap: 2,000 of buffer where the locked account has 3,000.

What to look for in your agreement

• Does the floor stop, and where? Look for wording like "stops trailing", "locks" or "freezes", and note the exact level: the starting balance, or the starting balance plus a fixed amount.
• What has to reach the trigger? Open equity, closed balance or the end-of-day balance.
• What happens after a payout? Check whether the floor stays at its locked level and whether a minimum balance has to remain.

GlanWick's trailing drawdown check works out your floor as highest balance minus trailing, and your buffer as current balance minus floor. After a lock, enter the high that triggered it (52,000 in the example) as the highest balance, and the floor reads the locked 50,000. Note the lock date and each withdrawal in your journal, next to the trades that got you there.

Short version

On many programs, trailing stops once the floor reaches the starting balance or a small amount above it, and your agreement names the level. With 2,000 trailing on 50,000 and a lock at the start, that's the first time the account reaches 52,000. Before the lock your buffer is 2,000 at best. After it, profit builds buffer and every withdrawal takes it back out.