The daily loss limit
Lesson 4 of 12 in the course “Prop Trading”. Free, with animations and a quiz.
What the daily limit is
It’s how much you may lose in one day. Usually 5% of the starting balance: $5,000 on a $100,000 account. Break it by a single dollar and the account is closed, even if you’re up overall. It’s the most common reason people fail at a prop firm, so we start with it.
What it’s counted from
Most often from the balance at the start of the day, at midnight firm server time. Example: yesterday Mira finished at $102,000. Today her floor is $102,000 − $5,000 = $97,000. The account must not dip below that line for even a second. Some firms count the day’s start from equity instead, so check the rules.
Open trades count too
The trap: the limit includes not only closed losses but floating ones too, meaning the loss on an open trade. If a trade dips to −$5,100 for a minute and then turns green, it’s too late: the breach already happened. That’s why you always set a stop, right when you enter.
How much you can still lose today
Before every trade, count what’s left: the day’s limit minus what you’ve already lost today. Mira has lost $3,000, so $2,000 is left. If the next trade’s stop is $2,500, she can’t open it: one stop and it’s over. In the Brainax simulator this number is always on screen, in the “Can still lose today” line.
Make your own limit stricter
Experienced traders set their own daily limit twice as strict as the firm’s: say 2–2.5% instead of 5%. Hit it and the day is over, no “one last trade to win it back”. That way one bad session never closes the whole account, and tomorrow you still have something to work with.
Check yourself
- A $100,000 account with a 5% daily limit. Yesterday Mira ended the day at $101,000. Where is today’s floor?
Correct answer: $96,000. The $5,000 limit counts from the start-of-day balance: $101,000 − $5,000 = $96,000. - Mira’s open trade dropped to −$5,200 against a $5,000 limit, then came back to profit. What happens to the challenge?
Correct answer: Failed: floating losses count too. The account was below the floor, even if only for a moment. To the firm that’s a breach, however the trade ends. - Today Mira has already lost $3,500 of $5,000. The next trade’s stop is $2,000. What should she do?
Correct answer: Don’t open it: the stop is bigger than the $1,500 left. If the stop hits, the day’s loss becomes $5,500, over the limit. Better to call it a day.
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