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Soft vs hard daily loss limit: which one ends your account?

Two accounts can both say “$1,000 daily loss limit”. On one, hitting it ends your day. On the other, it ends the account. Same number, very different rule.

The two kinds

• Soft limit: hit it and your positions are closed and you’re done for the day. The account is still alive tomorrow.
• Hard limit: hit it and the account (or the evaluation) is over, the same as touching the drawdown line.

Some firms also count open losses, not just closed trades, so a trade can hit the limit before you close it. Read your firm’s wording.

One bad day, two outcomes

Example: a $50,000 account with a $2,000 drawdown and a $1,000 daily loss limit. A bad morning reaches −$1,000.

The part people miss with a soft limit

A soft limit protects the account for one day, but the loss still comes out of your drawdown. With a $2,000 drawdown and a $1,000 soft limit, two full-limit days in a row still end the account. “Soft” is about today, not about the account.

The drawdown runway calculator shows how many worst days your account can survive on your numbers.

Neither is a trap

A soft limit is more forgiving on the day. A hard limit makes one bad day final, so it asks for more care on every trade. The point is knowing which one you bought, before the day it counts.

What to do with this

1. Find the word. Look for “soft”, “hard”, “pause” or “violation” next to the daily limit on your firm’s rules page.
2. Set your own stop below it. Many platforms let you set your own daily stop, and some can lock you out when you hit it. Put it far enough under the firm’s number that a fast market can’t push you past it.
3. Put it in your rules. The Desk checks your daily stop before every trade.

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.