What is 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.
It is the second risk limit on a prop firm account, and it acts independently of total drawdown.
The calculation
It generally sits at around half the maximum drawdown: 5 % daily loss against 10 % total loss is the most widespread combination on forex. It resets at a specific hour, most often midnight in the firm’s reference time zone — a detail that matters for a trader working from another one.
The starting point of the calculation varies: some firms measure from the previous day’s closing balance, others from the highest equity reached during the current day. The second method is appreciably stricter, since a morning gain given back in the afternoon eats into the limit.
Realised or unrealised loss
Most firms include open positions in the calculation. A position sitting on a 4 % unrealised loss, on an account limited to 5 %, therefore leaves you very little room — even if you have closed nothing and intend to hold.
A rule that is disappearing
Several firms, particularly on the futures segment, have removed the daily limit in recent years: only the maximum drawdown then frames the risk. It is a genuine selling point, but it shifts responsibility onto the trader: with no daily guardrail, a single bad session can consume the entire available margin.
Where the limit exists and is optional, switching it on sometimes unlocks higher withdrawal caps. Check that point: the constraint can pay.
Updated on
Related terms
- 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.
- 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.
- Funded account A funded account is the trading account a prop firm allocates once the evaluation is passed. The trader operates under continuing risk rules and keeps a share of the profits, without ever holding the nominal capital.