The daily loss limit sounds like the simplest rule in prop trading: do not lose more than a set amount in one day. It is also the rule that ends more accounts than any other, usually because traders measure it from the wrong starting point.
- The daily loss limit caps how much you can lose in a single trading day. Breaking it is normally an instant fail.
- The key question is what it is measured from: yesterday’s closing balance, closing equity, or the higher of the two.
- Open trades count. A losing position you have not closed can breach the limit on its own.
- It resets at a fixed time each day. Know exactly when, in your own time zone.
What a daily loss limit is
A daily loss limit is a cap on how much the account can fall within one trading day. It sits alongside the maximum drawdown, which is the overall floor for the account. You can be well above the overall floor and still breach the daily limit with one bad session.
The number that matters: what it is measured from
The percentage is usually applied to your starting balance to get a fixed dollar amount. On a $10,000 account with a 5% limit, that is $500. The part firms handle differently is the reference point each day. There are three common versions:
- From the previous day’s closing balance: only closed trades count at the reset.
- From the previous day’s closing equity: open positions at the reset are included.
- From the higher of the two: the strictest version, and the one you should assume unless told otherwise.
A worked example
You are trading a $10,000 account with a 5% daily limit ($500), measured from the higher of closing balance or closing equity. At yesterday’s reset your closed balance was $10,200, and you had a trade open that was $150 in profit, so equity was $10,350.
Today’s reference point is $10,350, the higher of the two. Your floor for today is $10,350 minus $500, which is $9,850. If that open trade reverses and your equity touches $9,850 at any point today, the limit is breached, even though you might feel you have only lost $350 of your own closed profit.
Traders tend to count from the balance they remember. Firms count from the number in the rules. Holding a winning trade over the reset raises the reference point, and with it the level you must not fall below the next day.
Open trades count
On most products the daily limit is checked against equity, not just closed trades. A position that is down $500 and still open has used your entire daily allowance. Stops matter here more than anywhere, because the limit does not wait for you to close the trade.
When the day resets
Every firm resets the daily limit at a fixed time. At TradePath it is 5:00 PM New York time. For a trader in London that is usually 10:00 PM, and for Sydney it is the following morning. A loss taken at 4:55 PM New York time and one taken at 5:05 PM fall in different days.
How to stay inside it
- Work out your dollar floor for the day before you place the first trade, and write it down.
- Size positions so that a stopped-out trade uses a fraction of the limit, not all of it.
- Be deliberate about holding open profit over the reset, because it moves tomorrow’s reference point up.
- Stop for the day at a personal limit that is tighter than the firm’s.
How TradePath handles it
Where a daily limit exists, it resets at 5:00 PM New York time and is calculated from the greater of the previous day’s closing balance or closing equity. The futures products have no daily limit, so the max drawdown is the only loss rule. Full detail is in Trading Objectives.
| Product | Daily loss limit | On a $10,000 account |
|---|---|---|
| One Step, Two Step, Instant Funding | 5% | $500 |
| Instant Funding Lite | 3% | $300 |
| Prediction Markets | 3%, measured on end-of-day equity | $300 |
| Equities | 2.5% | $250 |
| One Step Futures, Funded Futures | None | Max drawdown is the only loss rule |
Common questions
Is breaching the daily loss limit always a fail?
At TradePath it is a hard breach. In an assessment the assessment fails; in a funded account the account closes. Most firms treat it the same way.
Does the daily loss limit include commissions and swaps?
Yes. The limit is checked against the account value, and costs reduce the account value like any loss.
Why is there no daily limit on futures?
The futures products use a trailing max drawdown as the only loss rule. It means one bad day can end the account with no intermediate warning, so sizing matters even more.
Trading involves substantial risk. TradePath evaluations and funded accounts are simulated. This guide is general education, not financial advice. Rules can change; the program rules for the product you buy are what apply.