The daily loss limit
This caps how much the account may lose within a single day. Which day, and when it resets, is set by a named timezone in the rules, so it is clear when a new day starts.
Example. A 5% daily limit on a $10,000 balance works out to $500 in a day.
The maximum loss limit
This sets a floor for the whole challenge. It comes in two common forms.
- Static: the floor is fixed at the start and never moves.
- Trailing: the floor rises as your best result rises, so it follows you up.
Example. On $10,000 with a 10% static limit, the floor is $9,000 for the entire challenge. With a trailing limit set 10% behind your peak, if equity reaches $10,800 the floor rises to $9,720 ($10,800 x 0.9). Definitions differ between firms and between products, so read the exact wording of yours.
Working with the limits
- Many traders set a personal stop for the day well inside the daily limit, to leave room for slippage and for trades that run past a stop.
- Remember that a trailing floor can rise faster than you expect after a strong run.
- Check whether the limit is measured on balance or equity. The balance and equity article explains the difference.
This is general information, not advice. It does not consider your situation, and trading carries a high risk of loss.