Glossary · Prop Firms
Daily Loss Limit
A daily loss limit is the maximum amount a prop trading account's equity or balance is allowed to fall within a single trading day before the account is breached. It is set as a percentage of the trader's starting balance or equity for that day and resets at a fixed time, typically server midnight or UTC.
Why it matters
The daily loss limit works alongside the maximum loss limit as one of the two core risk rules monitored in parallel on every evaluation and funded account. Breaching either one usually ends the account immediately regardless of how profitable the trader has been overall, which means daily risk budgeting and position sizing have to be built around this single number rather than long-term performance.
Live data
Example
Say a trader starts the day with an account balance and a daily loss limit set as a percentage of it. If the account grows in value by the reset time, the limit is recalculated off the higher figure, so the floor for that new day sits higher than it would have otherwise. Profits banked before the reset raise the day's loss cushion; a flat or losing day keeps the floor closer to the prior balance.
Common misconception
Many traders assume only closed losses count toward the daily loss limit. In practice, most firms track running (floating) losses plus closed losses throughout the day, so an open drawdown can trigger a breach before any trade is closed. The daily loss limit is also frequently confused with the maximum loss limit: the daily rule resets every day, while the maximum loss limit caps total drawdown across the entire evaluation or funded account.
Related terms
See also
The FTMO firm profile shows how a leading prop firm documents its own daily loss limit and account rules in practice.
Sources
Calculation details and reset timing vary by firm, but the underlying mechanic (a percentage-based daily floor measured against the higher of starting balance or equity) is described in broadly similar terms across the industry.
Risk disclaimer: Trading carries a substantial risk of loss and is not suitable for everyone. Prop-firm evaluations charge fees and most traders do not pass. Nothing here is financial advice; figures can change, so verify current terms with the firm before purchasing.
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