GLOSSARY · PROP FIRMS
What is daily drawdown limit?
A daily drawdown limit is the maximum a prop firm account may lose within one trading day before the account is failed, usually 4% to 5% of the starting balance.
Also called: Daily loss limit
What it means
The critical detail is what the limit is measured against and whether floating losses count. Most firms measure against the balance or equity at the start of their trading day and include open positions, which means an unrealised loss can breach the limit without a single trade being closed.
Why it matters
The reset time is the firm's server midnight, which is frequently not your local midnight and not your broker's. A trade opened before the reset and held after it is exposed to both days' limits in ways that are easy to get wrong.
What this changes in practice
Our engine has a hard daily loss lockdown that halts scanning for the rest of the day once a threshold is crossed, which maps directly onto this rule. Setting that limit below the firm's — not equal to it — is the correct configuration, because equal leaves no room for slippage on the trade that reaches it.
Related terms
- Trailing drawdownA trailing drawdown is a maximum-loss threshold that follows the account's equity high upward, s…
- Prop firmA prop firm provides traders with capital to trade in exchange for a share of profits, typically…
- Evaluation challengeAn evaluation challenge is the paid assessment phase in which a trader must hit a profit target …
- DrawdownDrawdown is the decline from a peak in account equity to the subsequent trough, expressed as a p…
Educational information only, not financial advice. Trading leveraged products carries substantial risk of loss. Last updated 2026-08-11.