📖 Financial Lexicon Term
What is High-Water Mark?
The highest peak in value that an investment account has ever reached.
Detailed Explanation
In prop firm trading, trailing drawdowns are calculated based on the High-Water Mark of your account balance or equity. If you start at $100K and peak at $105K, the $105K becomes the new High-Water Mark, and your drawdown limit trails up accordingly.
💡 Practical Trading Example
Your trailing drawdown is always calculated as 5% below your High-Water Mark.