High-Water Mark
The highest balance your account has ever reached — the anchor point a trailing drawdown measures your loss limit from.
The high-water mark (HWM) is the peak your account has ever touched. Under a trailing drawdown, it’s the number everything hinges on: your loss floor is calculated as high-water mark minus the drawdown amount, and because the HWM never falls, the floor never falls either.
Get comfortable with this one formula and trailing drawdown stops being mysterious:
Floor = High-Water Mark − Drawdown Amount
Here’s a $50,000 account with a $2,500 trailing drawdown:
| Event | Balance | High-water mark | Floor (HWM − $2,500) | Room |
|---|---|---|---|---|
| Day 1 start | $50,000 | $50,000 | $47,500 | $2,500 |
| Good week | $54,000 | $54,000 | $51,500 | $2,500 |
| Losing week | $52,000 | $54,000 (unchanged) | $51,500 | $500 |
| Recover | $53,000 | $54,000 (unchanged) | $51,500 | $1,500 |
Notice the third row. The trader is up $2,000 overall and has only $500 of room. That’s the HWM doing its work — it remembers the $54,000 peak forever, even though the balance came back down.
The single biggest source of confusion is which balance sets the HWM:
- Under EOD trailing, the HWM is set from your closing balance each day. Unrealized intraday spikes never register.
- Under intraday trailing, the HWM is set from your peak unrealized equity, tick by tick. A trade that goes green and reverses still raises it.
A practical habit: track your HWM in a spreadsheet, not just your platform balance. Most platforms show you what you have, not what your peak was — and your true risk budget lives in the gap between them.
Many firms also stop the trail once the account reaches a certain profit level, locking the floor at or above your starting balance. Read Trailing Drawdown Explained and check the specifics in our directory.