How drawdown kills you
A “5% drawdown” means 6 different things depending on what it is measured against. Here is the same equity curve under all 6 types. Switch the type and watch where the floor sits.
With this floor, Trailing on the equity peak, the account closes on day 10, and at that moment you were up $4,843.
The floor follows your equity peak, including profit you have not closed. A good intraday moment that later unwinds leaves the floor up there for good. You can close the day green and be closer to losing the account than when you started.
The curve never changes, only the floor does. A demonstration of the rule, not a market simulation.
Same account, same run, 5 different floors
A sample ten-day run on a $100,000 account with a 6% drawdown, the census median. Only the published rule changes, and 3 of 5 close on the last day in profit.
Static, from the starting balance
the floor never catches up
162 models in 60 firms
Trailing until it locks
the floor never catches up
114 models in 49 firms
Trailing on the end-of-day balance
closes on day 10, up $3,225
42 models in 25 firms
Trailing on the equity peak
closes on day 10, up $3,790
31 models in 14 firms
Trailing, with no published stop
closes on day 10, up $3,790
19 models in 9 firms
Every rule here was read on the firm’s own page and carries its date on its model. Try other numbers