Static vs trailing drawdown: why the Edge floor moves up

Every challenge has a maximum drawdown: a level of equity the account can never touch. What differs is whether that level stays put or follows you up. Sprint, Classic and Ascend use a static floor. Edge, the instant funded account, uses a trailing one. The difference changes how a winning trade should be managed.

Static: set once, never moves

A static floor is calculated from the account size on day one and stays there for the life of the account.

Account size, Classic

$100,000

Maximum drawdown, 10%

−$10,000

Static floor

$90,000

If the account grows to $112,000, the floor is still $90,000. Growth gives you more room. That is the whole appeal of a static floor: every dollar of profit is a dollar of extra cushion.

Trailing: follows the highest equity

On Edge the drawdown is a fixed amount, 5% of the account size, measured down from the high-water mark: the highest floating equity the server has recorded since the account was created.

Account size, Edge

$100,000

Drawdown amount, 5%

$5,000

Floor on day one

$95,000

Equity reaches

$108,000

New floor

$103,000

The floor rises every time equity makes a new high, and it does not come back down. If equity later falls to $103,000, the account is closed, even though it is still $3,000 above where it started. This is the example used in section 4.3 of the Challenge Rules.

Open profit counts

The detail that matters most: the high-water mark is measured on floating equity, tick by tick, on the server. It includes profit on trades that are still open.

Take an Edge $100,000 account at the start. A trade runs $4,000 into profit, then comes back and is closed for $500.

Starting equity

$100,000

Open trade peaks at

+$4,000

High-water mark

$104,000

Floor from then on

$99,000

Trade closed at

+$500

Balance

$100,500

Room to the floor

$1,500

On a $100,000 static account the same trade would leave $10,500 above the maximum drawdown floor. On the trailing account it leaves $1,500, because the $4,000 the trade showed at its best lifted the floor for good. Nothing was lost on paper, but most of the cushion is gone.

The daily limit still applies

Edge also has a 3% daily limit, set each day from the Starting Day Balance, the same way as on every other challenge. On any given day, the higher of the two floors is the one that binds. In the example above, the next day would start like this:

Starting Day Balance

$100,500

Daily floor, 3%

$97,485

Trailing floor

$99,000

Floor that binds

$99,000

Here the trailing floor is the tighter one, so the daily limit is not the rule that matters that day. For how the daily limit is set, see how the daily drawdown limit works.

What this means in practice

On a static account a floating profit that fades costs you nothing but the profit. You can give a trade room to breathe.

On a trailing account every open high is permanent. That changes a few habits:

• A winner that gives back most of its gains still moves the floor. Decide in advance where you take profit or tighten the stop, rather than watching it retrace.
• Size positions against the room to the trailing floor today, not against the account size.
• A large open profit early in the account's life can leave very little room for the rest of it.

Which one suits you

Neither is easier in general. A static floor rewards patience with open trades. A trailing floor rewards taking profit on a plan. Edge gives direct access to a simulated funded account without evaluation phases, and the trailing floor is part of that trade-off. How the four challenges compare on every rule is covered in Sprint, Classic, Ascend or Edge.

The full wording is in sections 2, 4.3 and 4.4 of the Challenge Rules.