Two loss-limit models produce very different real risk budgets. Understanding which one applies is essential before you size a single trade.
Key takeaways
- Static drawdown anchors to your starting balance and never moves.
- Trailing drawdown re-anchors to peak equity, shrinking your room as you profit.
- The same strategy needs different position sizes under each model.
A static drawdown limit is measured from the initial balance. On a ₹10,00,000 account with a 6% overall limit, the floor is ₹9,40,000 for the entire evaluation and the entire funded life of the account.
A trailing limit is measured from peak equity. Make ₹50,000 and the floor rises with you. The headline percentage looks identical in the marketing material, but the lived experience is very different: profitable traders find their room shrinking exactly when they start scaling.
The consequence is position sizing. Under static rules a fixed rupee risk unit stays valid throughout. Under trailing rules the same unit becomes proportionally riskier after every good run, so the trader must either de-risk on the way up or accept a rising chance of breach.
Neither model is dishonest as long as it is disclosed clearly. What matters is that you read which one applies before you begin, and that you size to the rule that will actually be enforced rather than the number displayed on the dashboard.
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