Daily loss limit vs max drawdown, with one example

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Daily loss limit vs max drawdown, with one example

The daily loss limit starts fresh every day. The drawdown doesn’t. That’s why you can stay under your daily limit every single day and still lose the account.

Two different clocks

  • Daily loss limit: the most you can lose in one day. It resets at the start of each session.
  • Max drawdown: the most you can lose in total before the account closes. It never resets. Some types even follow your balance up.

One week, worked through

Example: a $50,000 account with a $2,000 drawdown and an $800 daily loss limit. Three losing days in a row:

day loss room left Mon $700 $1,300 Tue $750 $550 Wed $600 closed

All three days were under the $800 daily limit.

But by Wednesday only $550 of room was left. The account closes at −$550 that day without ever breaking the daily limit.

The number to watch

Each morning, the real limit for the day is the smaller of two numbers: your daily limit, and the drawdown room you have left. On Wednesday in the example, that was $550, not $800.

today's real limit = smaller of: daily loss limit drawdown room left

What to do with this

  1. Check your room before the open, not just the daily limit. The rule decoder shows where your line sits today.
  2. Size to the smaller number. A full loss has to fit inside what’s left of both. The free sizing lesson walks through it.
  3. Know how many bad days you have. The drawdown runway calculator turns your room and daily stop into a number of days.
Prop firm rule decoderWhere the line that closes your account actually sits, and what open profit costs you. Drawdown runway calculatorHow many maximum-loss days your account can survive. Soft vs hard daily loss limitOne ends your day, the other ends your account.

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Your daily stop, your contract cap, your room. Allowed or not, with the reason.

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See what's in it

Educational material only. Not investment advice. Trading futures involves substantial risk of loss and most people who try it lose money. Check your account rules with your firm; they change.