How does a daily loss limit work?

A daily loss limit caps how much an account may lose within a single trading day. It is the rule that ends the largest share of evaluations, usually before the overall loss rule is ever approached. The limit is expressed as a share of account size, but what matters more than its size is the reference point it is measured against. Two conventions are common. In the first, the limit is anchored to the balance recorded at the start of the trading day, so intraday gains do not raise the allowance and intraday losses do not lower it until the next day begins. In the second, it is anchored to the highest equity reached during the day, meaning an unrealised profit that is later given back consumes part of the allowance even if the account never falls below where it opened. The same sequence of trades can pass under one convention and breach under the other.

Most programmes measure equity, not balance. Equity includes floating profit and loss on open positions, so the limit can be breached by an adverse move on a position that is still running and has never been closed. Swap charges, commissions and financing adjustments are typically counted as well. A participant watching only closed-trade results may not see the breach forming. Some programmes evaluate this continuously, tick by tick; others check at intervals, which changes whether a brief spike below the threshold registers.

The day boundary is set by the firm's server clock, not the participant's local clock. Server time usually follows the platform's own zone, which may shift with daylight saving in one hemisphere and not the other. A participant in a distant time zone can find the reset falling in the middle of their trading session, splitting one continuous run of positions across two separate daily allowances.

A breach of the daily limit and a breach of the overall maximum loss are enforced differently. The daily limit is a recurring constraint that resets; the maximum loss is cumulative and does not. Some programmes end the evaluation on either breach. Others treat a daily breach as a suspension, a reset, or a restart under stated conditions, while an overall breach is terminal. The tables record which applies per firm and challenge type.