The daily loss limit explained
The daily loss limit sounds simple: lose more than a set amount in one day and the account fails. In practice, firms calculate it in different ways, and the differences decide whether a bad day ends your account.
Three questions to ask
To understand any firm's daily limit, you need three answers: what is the limit measured from, does it include open trades, and when does the day reset?
1. Measured from what?
- Initial balance. The limit is a fixed amount: 5% of a $100,000 account is always $5,000, however much you are up or down.
- Start-of-day balance or equity. The limit is a percentage of where you started the day. Up at $110,000, 5% becomes $5,500; down at $95,000, it shrinks to $4,750.
- The higher of balance or equity. Many firms take whichever was higher at the reset. If you end the day with $2,000 of open profit, tomorrow's limit is measured from that higher figure, so if the open trade reverses overnight you have already used part of the next day's room.
In our directory, 11 of 50 accounts measure the daily limit from the start of the day; the rest use the initial balance.
2. Do open trades count?
Many firms check the limit on equity, which includes open losses. A trade that is $5,000 down for a moment can breach the account even if it closes in profit. Others only count closed trades. If you hold through volatility, this difference matters more than the percentage itself.
3. When does the day reset?
Reset times vary: midnight in the firm's server time zone (often GMT+2 or GMT+3), midnight UTC, or 5pm New York time. A loss at 11pm and another at 1am might be the same day for one firm and two different days for another. Check the reset time against when you trade.
Limits that pause instead of fail
Some accounts treat the daily limit as a pause: hit it and trading stops until the next day, but the account survives. This is common at futures firms and on some newer forex accounts. 12 of the 50 accounts we track have no daily limit that can fail you; see the list of prop firms with no daily loss limit.
How to stay inside it
- Know your worst day: trades per day multiplied by risk per trade.
- Set your own stop for the day at half the firm's limit.
- Close or reduce trades before the reset if open profit would raise the next day's base.
- Count all open trades together; correlated pairs often lose together.
What PropPassCheck models
The test centre uses each account's basis (initial or start of day) and checks limits on closed trades by trading day. Firms that count floating losses can breach you sooner than shown, so leave extra room. For the bigger picture on sizing, read how much to risk per trade.
More guides
- How trailing drawdown works, and why it catches traders out
- Prop firm consistency rules explained
- How prop firm payouts work
- Prop firm trading restrictions you need to know
- Minimum trading days and time limits
- Why most traders fail prop firm challenges
- One-step vs two-step prop firm challenges
- Instant funding: what's the catch?