When you compare funded account programs, one of the differences that matters most, and is least understood, is the type of drawdown. This guide explains static drawdown and trailing drawdown, shows how each one moves with worked numbers, and covers what changes in the way you manage risk depending on which one you're trading under.
In short: a static drawdown is a loss floor set from the starting balance that never moves. A trailing drawdown is a floor that rises every time your account sets a new high, so a normal pullback after a good run can hit it. At Funded Profit the max total loss is static: 6% on the 1-Phase Challenge and 5% on Direct Access.
What drawdown means on a funded account
Drawdown is how far your account falls from a reference point. On a funded account, the max drawdown rule sets a floor: an equity level you can't touch. If your equity (balance plus floating profit or loss) reaches that floor, the account is closed.
The real question is: where is that floor measured from? That's where the two models split.
- Static: the floor is calculated once, from the starting balance, and stays put.
- Trailing: the floor is calculated from the highest point your account has reached, and rises with it.
It sounds like a technicality, but it completely changes how much room you have at any given moment.
Static drawdown: a floor that stays put
With a static drawdown, the floor is set on day one and doesn't change, however much you make.
Example (1-Phase Challenge, $100,000 account, 6%):
- Static floor: $100,000 − $6,000 = $94,000.
- If the account grows to $105,000, the floor is still $94,000. Your room is now $11,000.
- If it drops to $99,000, the floor is still $94,000. Your room is $5,000.
The key point: every dollar of profit widens your cushion. You start with exactly 6% of room, and as the account grows, so does the room.
The exact definition is in the drawdown type section of the rules.
Trailing drawdown: a floor that follows you
With a trailing drawdown, the floor tracks your account's high-water mark at a fixed distance. When you set a new high, the floor moves up. When the account pulls back, the floor does not move down.
Illustrative example ($100,000 account, 6% trailing on peak equity):
| Point | Equity | Peak reached | Trailing floor | Static floor |
|---|---|---|---|---|
| Start | $100,000 | $100,000 | $94,000 | $94,000 |
| Day 1: +$2,000 | $102,000 | $102,000 | $96,000 | $94,000 |
| Day 2: +$3,000 | $105,000 | $105,000 | $99,000 | $94,000 |
| Day 3: −$2,500 | $102,500 | $105,000 | $99,000 | $94,000 |
| Day 4: −$3,700 | $98,800 | $105,000 | $99,000 (hit) | $94,000 |
The trader in this example never lost 6% from the starting balance. They ended at $98,800, just 1.2% down. But under a trailing model, a $6,200 pullback from the peak was enough to close the account. Under the static model, they still had $4,800 of room.
Trailing variations worth knowing
Not every trailing drawdown works the same way. If you ever trade under one, check these three things in the rulebook:
- Does it track equity or balance? If it tracks equity, even a floating gain you later give back pushes the floor up. Example: a trade runs to +$3,000 without being closed and ends at breakeven; your floor is now permanently $3,000 higher.
- Does it update in real time or at the end of the day? An end-of-day trail is less aggressive, but it still climbs with every green day.
- Does it ever stop rising? Some versions lock the floor once it reaches the starting balance. That helps, but until then your room is still tighter than with a fixed floor.
In all three cases the effect is the same: your real room is usually smaller than the percentage suggests.
How each model shapes the way you trade
The drawdown type changes concrete, everyday decisions.
Under a trailing drawdown
- Floating profits become a risk. Letting a winner run can lift your floor and leave you with less room if price comes back.
- Normal pullbacks hit harder. Every method has losing runs after winning runs; under a trailing model, that ordinary sequence is exactly the dangerous one.
- Traders tend to cut winners early. Many end up trimming profits just to keep the floor from moving, which bends their method out of shape.
Under a static drawdown
- You can let trades run according to your plan, without a floating gain eating into your room.
- Your cushion grows with your results. After a good run, a bad week doesn't put you against the wall.
- Discipline is still on you. A wide cushion isn't an invitation to size up. The rule of thumb of risking 0.25% to 1% per trade still applies.
Static drawdown alongside the daily limit
The total drawdown doesn't work alone. Funded Profit also has a max daily loss: 4% on the 1-Phase Challenge and 3% on Direct Access, calculated from the starting balance and measured from your balance at the start of the trading day (8:00 p.m. UTC-4).
Each day there are two floors, and the higher one applies:
- Example A: a $100,000 account starts the day at $103,000. Daily floor: $103,000 − $4,000 = $99,000. Static floor: $94,000. That day, $99,000 applies.
- Example B: the same account starts the day at $97,000. Daily floor: $93,000. Static floor: $94,000. That day, $94,000 applies, and your real room is $3,000, not $4,000.
That detail matters a lot when the account is in the red. We go deeper in the daily loss limit explained, and you can work out both floors with the loss limits calculator.
Planning your risk around a static floor
A fixed floor gives you clarity. Put it to work with a simple plan:
- Write your floor down in dollars. On a $100,000 Challenge, $94,000. On a $50,000 Direct Access account, $47,500.
- Work out your room every day. Current equity minus whichever floor is higher today.
- Size to your room, not your mood. If your room shrinks, shrink your size. For example, with less than $3,000 of room on a $100,000 account, drop to $250 per trade.
- Don't spend the cushion on purpose. A floor that doesn't move is no reason to walk toward it.
If you're preparing for an evaluation, this approach fits right into the method in how to pass a one-phase challenge.
FAQ
What type of drawdown does Funded Profit use?
Static. The max total loss is set from the starting balance and never rises, even as your account grows: 6% on the 1-Phase Challenge and 5% on Direct Access. It includes floating losses.
Does a static drawdown include open positions?
Yes. It's measured against your equity, which is balance plus floating profit or loss. If an open position drags your equity to the floor, the account is closed even though you haven't closed that trade.
Is static drawdown better than trailing?
For most methods, a static floor gives more room after a winning run and lets you hold trades without moving the limit. Risk management is still your job either way.
What happens if my equity touches the static floor?
The account is closed immediately, with no refund. That's why it pays to track your room every day and reduce your position size as you get closer to the floor, rather than letting one trade decide it.