Glossary · Prop Firms
High Water Mark
High water mark is the highest balance or equity an account has reached since it opened, and it is the reference point many prop firms use to trail a maximum drawdown limit. It only moves upward on new peaks; losses alone never pull it back down.
Why it matters
The high water mark sets how much room remains before a trailing drawdown breach, so misreading it is a common way traders lose funded accounts unexpectedly. Some firms calculate it from closed-position balance only, while others include floating equity from open trades, and that distinction changes how much real buffer a trader has at any given moment.
Live data
Example
Say a funded account climbs to a new equity peak. If the firm's drawdown floor trails the high water mark, that floor rises with the peak and stays there even if the account later dips back down. The floor does not fall back down just because equity retreated; it only moves again on a fresh high, or in some structures, when the trader withdraws profit.
Common misconception
Traders often assume the high water mark falls whenever the account loses money. In most structures it stays fixed at the prior peak and changes only on a new high, though a few models reduce it when a performance reward or profit is withdrawn from the account. Traders also confuse balance-based and equity-based high water marks, wrongly assuming unrealized floating profit moves the mark when a firm actually tracks closed-trade balance only. Getting this backwards leads to overconfidence about available drawdown room and unplanned account breaches.
Related terms
See also
Use the Compare Prop Firms tool to check which firms base their trailing drawdown on a high water mark versus a static drawdown model.
Sources
Risk disclaimer: Trading carries a substantial risk of loss and is not suitable for everyone. Prop-firm evaluations charge fees and most traders do not pass. Nothing here is financial advice; figures can change, so verify current terms with the firm before purchasing.
Next step
See how firms actually apply this.
Compare current account sizes, rules, discounts and funding terms side by side.
