Daily Loss Limit

The daily loss limit (or "max daily loss") is a per-day floor on your account. The most important and most misunderstood part is how the floor is calculated: some firms anchor it to the day’s starting balance, others to the day’s highest equity (so it can trail up intraday), and many count floating losses on open positions, not just closed trades. Whichever method applies, hitting the limit is typically an instant breach. The limit resets each trading day at a firm-defined time, often a server time you should know exactly, since a trade held across the reset can be treated as a new day. It exists to protect the firm’s capital from a single catastrophic session, and it is usually the first rule new prop traders trip over.

In plain English — A daily loss limit caps how far your account can fall within one trading day, measured from the day’s starting balance or equity high. Touching it — even on open, unrealized losses at some firms — usually fails the challenge or breaches a funded account. Its purpose is to stop one bad day from wiping out an account, and it resets at the start of each new trading day.

With a 5% daily loss limit on a $100,000 account, you may lose at most $5,000 in a day. Start the day at $103,000 and, depending on the firm, your floor for that day is $98,000 (balance-based) or trails up if you go further into profit.