Daily loss limit vs max drawdown: static, trailing and end-of-day rules explained
TradeForge team · Last updated
A daily loss limit caps how much you can lose in one trading day and resets each day. A max drawdown (max loss) limit caps how much the whole account can lose and does not reset. Breaking either one usually ends a prop-firm challenge. On a given day, the one closer to your current equity is the one that binds.
The two limits side by side
| Daily loss limit | Max loss (max drawdown) | |
|---|---|---|
| What it caps | The loss within one trading day | The loss of the whole account |
| Resets | Every day, at the firm's reset time | Never |
| Usually checked on | Equity, including open trades | Equity, including open trades |
| Main variations | Measured from the start-of-day balance, equity, or the higher of the two. Taken as a % of the initial size or of that start-of-day value | Static (fixed floor) or trailing (floor follows your highest balance) |
How the daily loss limit works
The firm records a value at the daily reset, then sets a floor below it. Your equity must stay above that floor until the next reset.
daily floor = start-of-day value − daily amount
Two things differ between firms:
- The start-of-day value. Some use the balance at the reset. Some use the higher of balance and equity, which matters when you hold a trade overnight in profit.
- The daily amount. Some take the percentage of the initial account size, so it is the same every day. Others take it of the start-of-day value, so it grows and shrinks with the account.
Worked example: balance basis, % of initial size
A 100,000 account with a 5% daily limit, taken of the initial size and measured from the start-of-day balance. This is how FTMO describes its 2-Step rule (source in the table below).
- Day 1 starts at 100,000. Floor: 100,000 − 5,000 = 95,000.
- Day 2 starts at 102,000. Floor: 102,000 − 5,000 = 97,000.
- If equity on day 2 drops to 96,900 at any moment, even with an open trade that later recovers, the rule is broken.
Worked example: higher of balance or equity, % of that value
The same account with a 5% daily limit taken of the higher of the opening balance and opening equity. This is how FundingPips describes its 2 Step Standard rule.
- Opening balance 105,000, opening equity 107,000 (a trade is open in profit). Baseline 107,000. Floor: 107,000 − 5,350 = 101,650.
- Opening balance 100,000, opening equity 99,000. Baseline 100,000. Floor: 100,000 − 5,000 = 95,000.
The first case is the trap: an open profit raises the baseline, so giving that profit back counts against the daily limit.
How max loss works: static vs trailing
Static: the floor is fixed at the initial size minus the max loss %. On a 100,000 account with a 10% static limit, equity must stay above 90,000, however well the account does first.
Trailing: the floor moves up with the highest balance reached. With a 6% trailing limit, a 100,000 account that grows to 108,000 has a floor of 108,000 × 0.94 = 101,520. A drop from 108,000 to 101,000 breaks it, even though the account is still above its starting size. Some firms stop trailing once the floor reaches the starting balance, and some trail on end-of-day values only (often called end-of-day trailing). Read your firm's exact wording.
Which limit binds first?
Compare the room left before each floor: room = current equity − floor. The smaller room is the binding limit.
Example: 100,000 account, 5% daily limit of the initial size from the start-of-day balance, 10% static max loss. Start of day 102,000, current equity 101,000.
- Daily floor 97,000, room 4,000.
- Max floor 90,000, room 11,000.
- The daily limit binds, with 4,000 left. At 1,000 risk per trade, three full losses leave 1,000; the fourth lands exactly on the floor, which breaches.
The prop firm drawdown calculator does this for your own numbers and rules.
Reset times and time zones
The daily limit resets at a set time in the firm's time zone, not yours. A loss just before the reset and another just after it fall on different days. Check where your firm's reset falls in your local time.
The four firms' rules, from their own sites
Each value below comes from the firm's own website on the date shown. Where a firm's site does not state a rule, the table says so. TradeForge is not affiliated with these firms, and rules change: check your firm's current rules page.
| Firm and program | Daily loss | Max loss | Targets | Source |
|---|---|---|---|---|
| FTMO: FTMO Challenge (2-Step) | 5% of the initial size, from the start-of-day balance. Resets 00:00 CE(S)T | 10%, static | 10% then 5%. Min days: 4 | ftmo.com/en/trading-objectives/. Checked 2026-11-06Account sizes are not listed on the rules page. The limit is breached when equity, including open trades, falls below it. |
| FundingPips: 2 Step Standard | 5% of the start-of-day value, from the higher of start-of-day balance or equity. Resets 00:00 platform time (UTC+2 winter, UTC+3 summer) | 10%, static | 8% then 5%. Min days: 3 per phase (none with the 3% daily-loss add-on) | help.fundingpips.com/hc/en-us/articles/34501809112081-2-Step-Standard. Checked 2026-11-06The daily limit is 3% or 5% depending on the configuration you bought. The preset uses 5%. |
| FundedNext: Stellar 2-Step | 5% of the initial size, from the start-of-day value (not stated). Resets 00:00 server time | 10%, static | 8% then 5%. Min days: 5 per phase | fundednext.com/cfds/stellar-2-step, fundednext.com/general-rules/cfds/trading-objectives. Checked 2026-11-06The daily limit counts open-trade losses, swap and commission. The site doesn't say which start-of-day value it is measured from. |
| The5ers: High Stakes (2-Step) | 5% (base not stated), from the start-of-day value (not stated). Reset time not stated | 10%, static or trailing not stated | 10% then 5%. Min days: 3 profitable days per step | the5ers.com/high-stakes/. Checked 2026-11-06The program page gives the percentages only: not the daily basis, the reset time, or whether max loss is static or trailing. |
Before the first trade of the day
- Write down the day's floor and your room, in money.
- Size so that your planned number of losing trades fits inside that room.
- Count open trades: an open loss uses the room even before you close it.
Related
This article is general education, not investment advice. Prop-firm rules change: check your firm's current rules.