Glossary

Daily loss limit

Last reviewed: 16 September 2026·Tradelyze

A daily loss limit is a prop firm rule that caps how much an account may lose within one trading day. FTMO sets it at $5,000 a day on a $100,000 2-Step Challenge. Losses on still-open trades count too, and going past the limit breaks the rule. Topstep's optional Daily Loss Limit instead pauses trading until the next session.

New to this? Start with how prop firm challenges work, then prop firm rules and backtest metrics.

What is a daily loss limit in a prop firm challenge?

A daily loss limit is a prop firm rule that caps how much an account may lose within one trading day. A prop firm, short for proprietary trading firm, sells evaluation accounts, often called challenges, and funds the traders who pass its rules. How prop firm challenges work covers the other rules a challenge sets. Traders and firms also call the rule a daily drawdown limit or a maximum daily loss; a drawdown is a fall from an earlier level. The daily limit sits alongside a limit on the account's total loss, and it is the rule that catches one bad session.

FTMO checks its daily limit on equity, which is the account balance plus the profit or loss on trades that are still open. What happens at the limit depends on the firm. FTMO's Trading Objectives page says that if the equity drops below the daily limit, “the rule is considered violated.” Topstep's help center article on its Daily Loss Limit says of its version: “Triggering it is not a rule violation”. Topstep instead flattens open positions, cancels pending orders and blocks new trades until 5 PM CT the next session.

A daily loss limit matters for your money because one bad session can break it on an account you paid for. At a firm like FTMO that is a rule violation even when the strategy makes money over the month. The sections below cover how the dollar amount is set, when the day resets and whether open trades count. They end with the backtest number that shows how close a strategy comes.

Is the daily loss limit a percentage of the starting balance or of today's balance?

A daily loss limit is set on one of two bases, and they give different dollar amounts once the account has moved. On a starting-balance basis, the allowance is a fixed dollar amount worked out from the account size you bought. It stays the same however far the account rises or falls. On a day-start basis, the allowance is a percentage of that day's opening balance. It grows with a winning account and shrinks with a losing one. The two agree only on the first day, when the day's opening balance is the starting balance.

FTMO uses the starting-balance basis. Its Trading Objectives page sets the Maximum Daily Loss Amount at 5% of the Initial Simulated Capital on the 2-Step Challenge. The same page sets it at 3% on the 1-Step Challenge. On a $100,000 2-Step account that is $5,000 every day, even after the balance has grown to $120,000. This page did not confirm any current firm that uses the day-start basis on the firm's own site. Read the exact wording for the account you intend to buy.

The costly mistake is in the second row. A trader who budgets 5% of a grown $120,000 account plans for $6,000 of room and has $5,000 under a starting-balance rule. The third row runs the other way: after losses, a day-start rule is the stricter of the two.

When does the daily loss limit reset, and in which timezone?

A daily loss limit resets at a clock time the firm names. A backtest has to split its days at the same moment, or its daily figures will not match the firm's. FTMO's Trading Objectives page recalculates the Maximum Daily Loss Limit every day at 00:00 CE(S)T. That is midnight Central European Time, or Central European Summer Time while clocks are forward. The new level is “the account balance recorded at 00:00 CE(S)T of the current day” minus the fixed allowance.

FTMO's own $100,000 2-Step example on the same page puts the first day's level at $100,000 − $5,000 = $95,000. With a $102,000 balance at the next reset, the second day's level is $97,000. FTMO Academy's Maximum Daily Loss lesson adds that on the first day the balance used is the Initial Simulated Capital.

By clock arithmetic, midnight CE(S)T is 6 PM in New York and 5 PM in Chicago for most of the year. For a few weeks each spring and autumn, when Europe and the United States change their clocks on different dates, it is one hour later. Topstep works on its trading session instead: its Daily Loss Limit article gives the session as 5 PM CT to 3:10 PM CT.

Do open (floating) losses count toward the daily loss limit?

At FTMO, open losses count toward the daily loss limit. A floating loss is the loss on a trade that is still open. FTMO's Trading Objectives page applies the daily limit to equity, which it defines as “Balance + Open Positions P/L ± Swaps – Commissions.” A swap is the overnight financing charge or credit on a forex or CFD position. So a trade that dips through the level and then recovers has still broken FTMO's rule. The check runs while the trade is open, not only at the exit.

The reset reads the balance, not the equity, and that creates a trap for a position held past midnight. FTMO Academy's Maximum Daily Loss lesson warns: “A position that was within the limit before midnight may exceed the limit after the reset if the floating loss is too large.” Figure 1 shows how.

In numbers, on this constructed $100,000 account, the day 2 level is $102,000 − $5,000 = $97,000. Equity at the reset is $102,000 − $1,500 = $100,500, so the room is $100,500 − $97,000 = $3,500. A further $3,700 loss on the open trade takes equity to $96,800, below the level.

Firms word the floating-loss question differently, and this page verified the wording on FTMO's site only. Check whether your firm measures the day's loss on equity or on closed trades, and whether its reset reads the balance or the equity.

How is daily drawdown different from maximum and trailing drawdown?

Daily drawdown measures the fall within one trading day and starts again at each reset. A maximum loss limit, also called a total drawdown limit, measures the fall over the whole life of the account and never resets. The two rules catch different failures. One violent session can break a daily limit while the account sits well above its overall floor. A slow run of small losing days can break the overall floor without touching any daily limit.

On FTMO's 2-Step Challenge, per its Trading Objectives page, one day may cost 5% of the starting capital and the whole account 10%. The overall limit is fixed at the Initial Simulated Capital minus 10% of it. On a $100,000 account, two maximum losing days in a row take the balance from $100,000 to $95,000 and then to the $90,000 overall floor.

A trailing drawdown can end an account that is still in profit, because its floor rises with every new high. Trailing drawdown works through that rule step by step. For how the total figure is measured in a backtest report, see maximum drawdown. For every rule type side by side, see prop firm rule types.

Which backtest statistic predicts a daily loss limit breach?

The backtest number that predicts a daily loss limit breach is the worst intraday day. It is the largest fall on any single day, from that day's opening balance to the lowest equity before the firm's next reset. Compare it with the allowance in dollars. Two tempting numbers get it wrong. A day's net result, measured close to close, misses a day that dropped hard and then recovered. The maximum drawdown of the whole backtest can span weeks, so it answers a different question.

To measure the worst intraday day yourself, split your trade list at the firm's reset time, not at midnight in your chart's timezone. Within each day, add the trades up in the order they closed and note the lowest running balance. The biggest gap between a day's opening balance and its low is the figure. Built from closed trades, the figure cannot see a trade that went deep against you and recovered before the exit. Treat it as the least the real day could have been. Why a backtest under-reports breach risk explains the gap, and why close-to-close drawdown is not enough covers the same problem for the total figure.

How does Tradelyze check the daily loss limit?

Tradelyze checks a daily loss limit only when the rule set defines one. The result appears on a row named max_daily_drawdown in each firm's Rule Results table, with the value your backtest reached next to the limit. For each trading day, Tradelyze starts from the day's opening balance and replays that day's closed trades in the order they closed. It finds the lowest balance and takes the fall from the opening balance to that low. The worst day across the backtest is the Actual figure in the row.

Tradelyze's rule engine supports both bases described on this page. The starting-balance basis, named initial_capital in the row's message, divides by the starting account size and is the default. The day-start basis, named day_start, divides by that day's opening balance. Every firm preset uses the starting-balance basis, and the custom rule form has no setting for the basis. Every daily check run from the app therefore measures the day's loss as a share of the starting account size.

The presets set the limit itself. Tradelyze's FTMO presets carry a 5% daily limit, which matches the 2-Step Challenge. For the 1-Step Challenge's 3%, write a custom rule with Max daily drawdown % set to 3. The Topstep and Apex presets define no daily loss limit, so no daily limit is checked for them. If you switch on Topstep's optional Daily Loss Limit, enter it in a custom rule as a percentage of the starting account size. For example, $1,000 on a $50,000 account is 2%. Tradelyze treats a day that goes past it as a failed rule, which is stricter than Topstep's forced break. Custom prop firm rules explains how to turn a firm's published terms into a custom rule.

A Qualifies badge means every rule Tradelyze checked for that firm ran and passed. If the daily row fails, the card reads Not Feasible. What to do when a prop firm card reads Not Feasible starts with testing a smaller position size before changing the strategy. What Qualifies and Not Feasible mean lists the rules Tradelyze does not check, and how to read the Rule Results table covers the other rows.

Presets record a firm's rules as understood when they were written, so match the allowance to the firm's current terms before relying on the result. To judge the whole report, not one tile, use the pre-trade checklist. For the whole run, from upload to prop firm cards, see How Tradelyze validates a strategy. For account and credit questions, see the Learn FAQ.

Frequently asked questions about the daily loss limit

Sources

• FTMO, Trading Objectives, ftmo.com/en/trading-objectives, page metadata last modified 13 May 2026, retrieved 16 September 2026 — the Maximum Daily Loss Limit recalculated daily at 00:00 CE(S)T from “the account balance recorded at 00:00 CE(S)T of the current day” minus the Maximum Daily Loss Amount, which is 5% of the Initial Simulated Capital on the 2-Step Challenge and 3% on the 1-Step Challenge; the rule applied to equity, “Balance + Open Positions P/L ± Swaps – Commissions”; “If the equity drops below this limit, the rule is considered violated.”; the $100,000 examples ($95,000 and then $97,000 on the 2-Step Challenge); and the 2-Step Challenge's static Maximum Loss Limit of the Initial Simulated Capital minus 10% of it.
• FTMO Academy, Maximum Daily Loss, academy.ftmo.com/lesson/maximum-daily-loss, published 24 March 2023, last modified 7 March 2026, retrieved 16 September 2026 — the limit “resets every midnight CE(S)T based on the account balance recorded at that time”; on the first day the balance used is the Initial Simulated Capital; the calculation includes closed results, the floating P/L of open positions, commissions and swaps; and “A position that was within the limit before midnight may exceed the limit after the reset if the floating loss is too large.”
• Topstep, Daily Loss Limit in the Trading Combine and Express Funded Account, help.topstep.com article 10490293, last updated 30 June 2026, retrieved 16 September 2026 — the Daily Loss Limit is optional in the Trading Combine and Express Funded Account and automatic in the Live Funded Account; $1,000 on a 50K account, $2,000 on 100K and $3,000 on 150K; “Triggering it is not a rule violation”, with open positions flattened, pending orders canceled and no new trades until 5 PM CT the next session; trading hours of 5 PM CT to 3:10 PM CT.
• Tradelyze implementation, reviewed 15 September 2026 — the max_daily_drawdown rule, checked only when a rule set defines a daily limit; each day measured from its opening balance to its lowest closed-trade balance, with trades replayed in exit order; the initial_capital basis (the default, dividing by the starting account size) and the day_start basis (dividing by the day's opening balance); every preset on initial_capital, with no basis setting in the app; trades counted on their exit date in the exchange timezone; the FTMO presets' 5% daily limit and no daily limit on the Topstep and Apex presets.
• Constructed illustrations — the $100,000 basis table, the overnight position in Figure 1 and the $50,000 trading day on this page are constructed illustrations, not measured data. The New York and Chicago times for the 00:00 CE(S)T reset are clock arithmetic, not a firm statement.