Trailing Drawdown vs EOD Drawdown: What Every Prop Trader Must Know

The #1 reason traders fail prop firm evaluations isn't bad trading—it's not understanding drawdown rules.

Trailing drawdown and end-of-day (EOD) drawdown work completely differently, and confusing them can blow your account even when you're trading profitably.

In this guide, we'll explain exactly how each works, which is easier to pass, and how to adapt your strategy accordingly.

What is Drawdown?

Drawdown is the maximum amount your account can decline from its peak before you fail the evaluation (or lose your funded account).

Example:

• Starting balance: $50,000
• Max drawdown: $2,500 (5%)
• If your account drops to $47,500, you're out

Simple enough. The complexity comes from how that drawdown is calculated.

Trailing Drawdown Explained

With trailing drawdown, your drawdown limit moves up as your account grows—but it never moves down.

How It Works

Starting State:

• Account: $50,000
• Max trailing drawdown: $2,500
• Drawdown floor: $47,500 (you fail if you hit this)

You make $500:

• Account: $50,500
• Drawdown floor moves up to: $48,000
• Your new floor is $48,000, not $47,500

You give back $300:

• Account: $50,200
• Drawdown floor STAYS at: $48,000
• The floor never moves down

You make another $1,000:

• Account: $51,200
• Drawdown floor moves to: $48,700

The Problem with Trailing Drawdown

Let's say you have an amazing first day and make $2,000:

• Account: $52,000
• Drawdown floor: $49,500

Now you only have $2,500 of breathing room until you hit your floor—but your floor is $49,500, not the original $47,500.

If you give back those gains plus a little more, you could fail the evaluation even though you were profitable.

Real-World Example

Day 1: Make $2,000 (Account: $52,000, Floor: $49,500)

Day 2: Lose $1,500 (Account: $50,500, Floor: $49,500)

Day 3: Lose $1,200 (Account: $49,300)

Result: FAILED — even though you're up $300 overall from your starting $50,000.

This is why trailing drawdown is considered harder.

End-of-Day (EOD) Drawdown Explained

With EOD drawdown, your drawdown limit is only calculated at the end of each trading day (market close).

How It Works

Starting State:

• Account: $50,000
• Max EOD drawdown: $2,500
• Drawdown floor: $47,500

During the day, you're down $2,000:

• Intraday low: $48,000
• This doesn't count yet

You recover and close the day at $50,500:

• EOD balance: $50,500
• Drawdown floor moves to: $48,000
• Based on closing balance, not intraday low

Why EOD Drawdown is Easier

1. Intraday swings don't count — You can be down $2,000 mid-day and recover
2. Time to manage trades — Bad entries can be salvaged
3. More forgiving — Only your closing balance matters
4. Day 1 (EOD):
   • Open: $50,000
   • Intraday low: $47,800 (down $2,200)
   • Close: $51,000 (up $1,000)
   • Floor moves to: $48,500 ✓
5. With trailing drawdown, that $47,800 intraday low would have failed you immediately.
6. Rule 1: Lock in gains early
7. Stop trading when you're up $300-500. This raises your floor without risking giving it back.
8. Rule 2: Size down in the beginning
9. Trade smaller until your floor moves up enough to give you breathing room.
10. Rule 3: Avoid big winners early
11. Counterintuitive, but a huge early win raises your floor dramatically—making the rest of the evaluation harder.
12. Rule 4: Use hard daily loss limits
13. Know exactly when to stop trading each day to protect your floor.
14. Rule 5: Track your floor constantly
15. Always know exactly how much room you have.
16. Rule 1: Don't panic on intraday drawdowns
17. You have until market close to recover.
18. Rule 2: Manage losing trades, don't abandon them
19. If you're down mid-day, you can average in or wait for recovery (within reason).
20. Rule 3: Focus on positive EOD closes
21. Even a small positive day moves your floor up without the intraday stress.
22. Rule 4: Use the flexibility wisely
23. EOD drawdown is more forgiving, but don't abuse it by taking excessive risk.
    • Apex Trader Funding (can switch to EOD)
    • Bulenox
    • Elite Trader Funding
    • Most Rithmic-based firms
    • Take Profit Trader
    • My Funded Futures
    • Topstep (on funded accounts)
    • TradeDay
24. Pro Tip: Some firms offer both options. Always choose EOD if available.
25. Check your floor BEFORE trading each day. Many platforms show it; if not, calculate manually.
26. After several winning days, your floor is high. One bad day can end you.
27. By the time you realize you're close to the floor, it's often too late to recover.
28. If EOD is available and you're not a precision scalper, always pick EOD.
29. Trailing drawdown requires different behavior than EOD. Trade accordingly.
    • Starting balance
    • Current balance
    • Drawdown floor
    • Distance to floor (in $ and %)
    • Daily P&L
    • Running P&L
30. Simple tracking template:
31. Trailing Drawdown:
    • Risk 0.5-1% per trade maximum
    • Smaller positions = smaller swings
    • Build up slowly
32. EOD Drawdown:
    • Can risk 1-1.5% per trade
    • More flexibility for intraday management
    • Still respect daily limits
33. Set a daily loss limit below your max drawdown:
34. When you hit your daily limit, stop trading. No exceptions.
35. Managing drawdown is easier with the right indicators and tools:
    • Risk calculators — Know your position size before entering
    • Stop loss automation — Remove emotion from exits
    • P&L tracking — Real-time awareness of your standing
36. Trinity Trading offers NinjaTrader tools that help you:
    • Calculate proper position sizes
    • Set and manage stops automatically
    • Track your performance in real-time
37. → Explore Trinity Trading Tools
    1. Trailing drawdown moves up in real-time and never moves down—making it harder
    2. EOD drawdown only counts your closing balance—more forgiving
    3. Choose EOD when available
    4. Track your floor daily (or continuously for trailing)
    5. Set daily loss limits below your max drawdown
    6. Size positions appropriately for your drawdown type
    7. Use tools to automate risk management
    8. Understanding drawdown rules isn't glamorous, but it's the foundation of prop firm success. Master this, and you're already ahead of 80% of traders.
    9. Trading involves significant risk. This article is for educational purposes only.

Key Takeaways

The Right Tools Make a Difference

Daily Loss Limits

Position Sizing

Risk Management for Drawdown Protection

Create a Spreadsheet

What to Track Daily

Drawdown Tracking Tools

Mistake 5: Not Adjusting Strategy

Mistake 4: Choosing the Wrong Account Type

Mistake 3: Ignoring Drawdown Until It's Too Late

Mistake 2: Trading Big After a Winning Streak

Mistake 1: Not Knowing Your Floor

Common Drawdown Mistakes

EOD Drawdown Firms

Trailing Drawdown Firms

Which Prop Firms Use Which Type?

EOD Drawdown Strategy

Trailing Drawdown Strategy

How to Trade Each Type

Side-by-Side Comparison

Real-World Example