Daily drawdown explained: how prop firms measure your daily loss
The daily loss limit, or daily drawdown, is the rule you can break fastest: one bad session is enough. It also hides the most detail. Two firms can both say "5% daily" and draw the line in different places. Here is how it's measured, with numbers.
What the daily loss limit is
It's the most you're allowed to lose in one trading day, usually between 3% and 5% of the starting account. If your equity touches that level, even for a moment, the challenge is over.
Where the line is drawn: the balance at the start of the day
Most firms don't measure from your starting capital but from where you started the day. FTMO recalculates the limit every night at 00:00 CE(S)T: the balance at midnight minus 5% of the initial capital (3% on its 1-Step). On a $100,000 account:
| Day | Balance at midnight | Daily loss allowed | Equity must stay above |
|---|---|---|---|
| 1 | $100,000 | $5,000 | $95,000 |
| 2 | $102,000 | $5,000 | $97,000 |
| 3 | $99,500 | $5,000 | $94,500 |
Look at day 2: after a good day the floor rises with you, so you can't "spend" yesterday's profit today. Firms also differ in the details. Some start from the higher of balance and equity at the reset, and some take the percentage of the start-of-day balance instead of the initial capital. Read your firm's definition word by word.
Why open trades count: balance vs equity
Your balance only changes when you close a trade. Your equity is the balance plus the profit or loss of trades that are still open. FTMO, like many firms, checks the daily limit against equity, so a trade that is deep in the red can breach the limit before you close it.
You go to bed with a $100,000 balance and one open trade at −$1,200. At midnight the new limit is set from the balance: $100,000 − $5,000 = $95,000. Your equity is already $98,800, so the new day starts with $3,800 of room, not $5,000.
Know when your day resets
FTMO resets at 00:00 Prague time, CE(S)T. Many futures firms start the trading day with the evening session in New York instead. A loss at 23:30 and another at 00:30 can land on different days or on the same one, depending on the firm. Put the reset time in your trading plan, especially if you trade the Asian session.
How to stay inside it
- Risk no more than about a quarter of the daily limit on any single trade.
- Count open risk: the distance to the stop on every open position, plus today's closed losses.
- Stop for the day at about half of the limit. Plenty of funded traders do.
- Don't add to a losing position to "average down" near the limit.
- Around big news, spreads widen and stops can slip. Leave extra room or stay out.
Practise it before it costs you a challenge
In the PrepFunded simulator you choose whether the daily limit is measured on balance or on equity, and the screen shows how much room you have left on every candle, including the effect of open trades.
Rehearse these rules for free
Set your firm's exact target, daily loss and maximum loss in the PrepFunded simulator and trade markets built on real price history, candle by candle. Fail here for free, not on a paid challenge.
Sources
Rules checked on 30 October 2026. Firms change their rules, so confirm them on the firm's own site before you buy a challenge.
PrepFunded is a challenge simulator. It isn't a prop firm, it doesn't offer funded accounts and nothing here is investment advice.