A trailing drawdown sets your maximum loss as a fixed amount below the highest balance your account has reached (at some firms, a percentage of that high), rather than a fixed floor. As your balance climbs, the floor climbs with it. If the account falls back to that floor, the challenge or funded account is breached, even if you are still above where you started.
Firms differ in what the limit trails. Some trail the highest closed balance, so only closed profits move the floor. Others trail equity, so an open trade that spikes into profit and then reverses can drag the floor up and then breach it on the way back down. Some versions stop trailing once the floor reaches the starting balance, which locks in breakeven. The firms we track include all three variants, so the exact rule on the plan you buy matters more than the label.
The trap is counting paper profits as safety. A trader who runs an account up and then gives back most of the gain can breach a trailing limit while still showing an overall profit. The limit protects the firm's capital, not your winnings.
Before you buy, check three things on the rules page: whether the limit trails balance or equity, whether it locks at the starting balance, and whether it applies in the funded stage as well as the challenge. Prop trading can cost you every fee you pay.