Prop Firm Daily Drawdown Explained

The daily loss limit, or daily drawdown, is the rule that ends the most prop firm challenges. It caps how much your account can lose in a single trading day. The percentage looks simple, but firms calculate it in different ways, and those differences decide whether a bad day ends your account.

The three questions to ask

1. Is it a percentage of the initial balance or of today’s starting balance? FTMO’s 2-Step sets the daily limit at 5% of the initial balance, so on a $100,000 account it’s always $5,000. Other firms, like SabioTrade, take a percentage of the previous day’s end-of-day balance, so the allowance grows slightly as you profit.

2. Does it count open trades? Most firms measure equity, which includes floating losses, swaps and commissions. A trade you haven’t closed can still breach you.

3. When does the day reset? Usually at midnight in the firm’s server time zone or at 5 PM New York time. Trades held across the reset carry their floating result into the new day’s calculation.

Reset times in South African time

Firms that reset at 5 PM New York time reset at 23:00 SAST during US daylight saving time and 00:00 SAST otherwise. Firms using midnight in a European server time zone typically reset at 00:00 or 01:00 SAST. Check your firm’s rule and put the SAST time in your trading plan.

Worked example

You’re trading a $100,000 account with a 5% daily limit based on the initial balance. You start the day at $102,000. Your breach level today is $102,000 − $5,000 = $97,000. If you close two losing trades for −$3,000 and have an open trade at −$1,800, your equity is $97,200: you’re only $200 from breaching.

If the same firm calculated from today’s starting balance, the allowance would be 5% of $102,000 = $5,100 and the breach level $96,900.

Typical daily limits

How to never hit it

• Risk 0.25–1% per trade so several losses in a row stay inside the limit.
• Set a personal stop at half the firm’s limit.
• Close or reduce positions before the daily reset if they’re deep in the red.
• Check your live breach level with our daily drawdown calculator.

The overnight trap

Swing traders often breach the daily limit without placing a trade. If you hold a position into the daily reset while it’s showing a floating loss, that loss counts toward the new day’s allowance at many firms. A gap at the next market open can then push equity below the breach level before you can react. Reduce size or close positions that sit deep in the red before the reset.

Daily drawdown vs maximum drawdown

The daily limit protects the firm from one bad day. The maximum drawdown protects it from a slow bleed. You can breach either one without touching the other, so track both. Our trailing vs static drawdown guide covers the maximum limit in detail.

Prop firms we currently recommend

1. 1
   

   FTMO Best overall

   Max account

   $200,000 (more via scaling)

   Profit split

   80%, up to 90%

   Fee from

   €89 (≈ $10K account)

   Our rating

   4.6 out of 5

   Visit FTMO Read review
2. 2
   

   FundedNext Best for MetaTrader users

   Max account

   $200,000 (up to $4M through scaling)

   Profit split

   80%, up to 95%

   Fee from

   $59.99 USD (confirm at checkout)

   Our rating

   4.4 out of 5

   Visit FundedNext Read review
3. 3
   

   Funding Pips Best budget pick

   Max account

   $100,000 per account (scales to $2M)

   Profit split

   60–100% (depends on payout cycle)

   Fee from

   About $29–$36 USD ($5K)

   Our rating

   4.3 out of 5

   Visit Funding Pips Read review

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