What is a daily loss limit?
A daily loss limit is the maximum amount a trader can lose in one trading day before stopping. Traders set their own; prop firms enforce one as a rule, and breaching it ends the evaluation. It caps the damage of a bad day and ends a tilted session by rule rather than by willpower.
Key points
- A personal limit is your rule, set before the session.
- A prop-firm limit is the firm’s rule, usually a percentage of the starting balance.
- Set the personal limit inside the firm’s, not at it.
How prop firms calculate it
Rules differ by firm and product, so read the exact definition. At FTMO, for example, the Maximum Daily Loss in the 2-Step Challenge is 5% of the initial simulated capital (3% in the 1-Step). It is counted from the balance at midnight CE(S)T and includes floating losses on open positions.
How many losses fit
- 5% limit, 2% risk per trade: the 3rd loss in a row reaches it.
- 5% limit, 1% risk: the 5th loss.
- 5% limit, 0.5% risk: the 10th loss.
Setting a personal limit
A personal limit below the firm’s — for example half of it — leaves room for slippage and for a last trade that goes wrong, and it turns “one more trade” into a decision made in the morning.
Example
On a $100,000 FTMO 2-Step Challenge account that closed yesterday at $102,000, today’s limit is $102,000 − $5,000 = $97,000 in equity. A personal limit of 2.5% stops the trader at $99,500.
Numbers are illustrative.
Questions
Does the daily loss limit include open trades?
It depends on the firm. FTMO counts equity, so a floating loss can breach the limit even if the trade later recovers. Check how your firm defines it.
What daily loss limit should I set for myself?
One you won’t reach on an ordinary losing streak at your risk per trade — and below any limit your firm enforces.