Why We Size Off the Drawdown Limit First — EOD Trailing Drawdown Explained
The sizing flip that keeps funded accounts alive: size off the limit first, with 1,500-path Monte Carlo data showing how much of the hard floor each portfolio uses at its deepest.
Transcript
most traders blow prop accounts the same way. they size for the return. they pick a size that hits the profit target fast, and treat the drawdown limit as a thing to avoid.
we build the opposite way. sized off the limit first.
here's every portfolio. the worst stretch over twelve months, against the hard limit. none of them sit on the floor. there's room left, even on a bad run. that's the design.
here's the flip most people miss. they size for the target, and manage the floor as it comes. we go the other way. we size from the limit, so a normal bad stretch still leaves room above the floor. then the return is whatever it is, above that.
the breach math takes care of itself. but it only holds if the strategy respects the limit across a lot of paths. not the one backtest that happened to work.
it works because of how e o d trailing behaves. the floor only moves off your closing balance. intraday swings don't touch it. on intraday trailing it's the opposite. the floor chases your highest point of the day, so a pullback on a green trade can breach you.
e o d is the forgiving one. a position can take heat all session, as long as it closes okay. so you size for the close to close drawdown. not the worst tick.
one good backtest proves nothing. so three years of backtest, then fifteen hundred monte carlo paths on top, dropping trades at random to stress it.
and the number that got watched wasn't the return. it was how much of the hard limit each portfolio ate at its deepest. the balanced futures ones top out around sixty to seventy percent. even the most aggressive stays under eighty.
the forex side uses even less. about a third. because the strategies don't correlate, so they don't all bleed at the same time.
eight portfolios. futures and forex. each one sized off its drawdown limit first, not its return target.
everything flattens before the close, so the settlement's clean. no overnight gap moving the mark.
full breakdown's on the blog, link below. the strategy doesn't get bored.
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All figures are hypothetical or from live-tracked accounts as stated in the video. Past and simulated performance does not guarantee future results. This is educational content, not financial advice.