TDD Explained

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Definition

Trailing Drawdown — shorthand for the trailing max drawdown amount or current trailing drawdown level.

Explanation

TDD represents the running calculation of your maximum peak-to-trough account balance decline, which continuously updates as your account value fluctuates. Unlike static drawdown which remains fixed, trailing drawdown follows your account's highest point and measures how far you've dropped from that peak at any given moment. Most prop firms use this metric to determine if you've violated their risk management rules.

Example

If your $100k account reaches $105k (new peak) then drops to $102k, your TDD is $3,000 from the $105k high point, not from your original $100k starting balance.

Why It Matters

TDD violations are one of the most common reasons traders get their accounts breached at prop firms.

Common Misconceptions

  • TDD resets daily or weekly

    Reality: TDD continuously tracks from your account's all-time high water mark until you surpass it

  • TDD is calculated from your starting account balance

    Reality: TDD is always measured from your highest account peak, which moves up as you make profits