What is breach?
A breach is the violation of a risk rule that triggers a sanction on the account. Depending on the firm and the rule involved, it suspends the trading day, cancels a payout, or closes the account for good.
Not all breaches are equal, and the difference between the categories decides whether an account survives.
Hard breach and soft breach
A hard breach closes the account immediately and permanently. It is almost always the sanction for exceeding the maximum drawdown. There is no way back: you buy another account, or pay for a reset where the firm offers one.
A soft breach is reversible. It usually suspends the trading day — positions are closed, the platform locks until the next session — without ending the evaluation. It is frequently the sanction for breaking the daily limit at firms that separate the two levels.
The distinction is not universal: some firms treat a daily breach as a hard breach. Check this one explicitly, because it changes the cost of a bad session entirely.
Rule breaches with no number attached
A third category has nothing to do with loss limits and everything to do with method: trading inside a restricted news window, copy trading between accounts, running a prohibited robot, latency arbitrage.
These violations usually surface at payout time, during the account review. The sanction ranges from cancelling the gains concerned to closing the account with no compensation.
The blind spot
A breach can happen on a move you never saw: an opening gap, slippage during an announcement, an unrealised loss on a position held overnight.
That is why the margin above the floor should never be calculated to the last dollar. An account that permanently lives a few hundred dollars from its limit will eventually cross it on something unforeseeable.
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Related terms
- Daily loss limit A daily loss limit is the maximum loss allowed on a single trading day. Separate from total drawdown, it resets each day and breaching it means, depending on the firm, the day is suspended or the account is closed.
- Drawdown Drawdown is the maximum loss allowed on a prop firm account before it is closed. It is expressed as a percentage or a fixed amount, and calculated under three models — static, end-of-day trailing or intraday trailing — with very different consequences.
- Equity Equity is the value of a trading account with open positions included, unlike balance which counts only closed trades. Most prop firms calculate their risk limits on equity.
- Payout A payout is the actual transfer of a funded trader's gains. It follows a cycle specific to each firm, after a minimum period since the account was opened, and often above a floor amount.
- Stop out A stop out is the platform closing positions automatically once a loss threshold is reached. On a prop firm account it usually coincides with maximum drawdown and ends the account.