Daily Loss Limit vs Trailing Drawdown, Explained
One trading day, worked through five readings of balance, equity and peak, to show why the same trades can sit inside one limit and past another.
3 Nov 2026 · 6 min read
On this page
A daily loss limit caps how far an account may fall inside one trading day; a trailing drawdown is a floor under the whole account that rises with your best level and never comes back down. Both are measured in money against a reference point, and the reference point is where rulebooks differ. Rules vary from firm to firm, so this page defines the pieces and works one day through every reading. It names no firm and states no firm's figures.
What each rule measures
- Daily loss limit. A set amount below the day's starting level. Fall to that level at any point in the day and the limit is reached. It resets when the next day starts.
- Static maximum loss. A fixed floor below the starting balance. It never moves.
- Trailing drawdown. A floor a set distance below your highest level so far. When your level makes a new high the floor rises with it; when you lose, the floor stays where it was. It only ever moves up.
Four questions every rulebook answers
- From what level is the day counted? The opening balance, the opening equity, or the higher of the two. They differ only when a trade is still open overnight.
- What is measured against it? Closed results only, which is the balance, or equity, which adds the profit or loss of open positions. See equity and balance.
- When does a day start? At a set reset time, in a set timezone. It may not be midnight where you are, and your broker's server clock may differ from the firm's.
- For a trailing floor: which peak counts? The highest closed balance, or the highest equity including floating profit that was later given back. Some rules also stop the floor rising once it reaches a set level, for example the starting balance.
One worked day, made-up inputs
An evaluation account that started at 50,000 (account currency, made-up). The daily limit is 1,000 and the maximum loss 3,000. These are illustrative amounts, not any firm's. The day has two trades. The table follows balance, floating profit and equity at each step; equity is balance plus floating.
| Step | Balance | Floating | Equity |
|---|---|---|---|
| Day opens, nothing open | 50,000 | 0 | 50,000 |
| Trade A open and in profit | 50,000 | +1,200 | 51,200 |
| Trade A closes at +200 | 50,200 | 0 | 50,200 |
| Trade B open and in loss | 50,200 | −1,300 | 48,900 |
| Trade B closes at −1,100 | 49,100 | 0 | 49,100 |
The day finishes −900. On the way, equity reached 51,200 and fell to 48,900, a swing the closing balance does not show.
The same day, read five ways
Each row applies one reading to the table above: its reference level, the floor that gives, the lowest level the rule looks at, and how much room that left. The maximum loss rows all look at equity here.
| Reading | Counted from | Floor | Looks at | Room left |
|---|---|---|---|---|
| Daily loss, closed results only | opening balance 50,000 | 49,000 | lowest balance 49,100 | 100 |
| Daily loss, equity | opening equity 50,000 | 49,000 | lowest equity 48,900 | −100 (breached) |
| Maximum loss, static | starting balance 50,000 | 47,000 | lowest equity 48,900 | 1,900 |
| Trailing, from the highest closed balance | peak balance 50,200 | 47,200 | lowest equity 48,900 | 1,700 |
| Trailing, from the highest equity | peak equity 51,200 | 48,200 | lowest equity 48,900 | 700 |
- Closed results against equity. The daily limit leaves 100 when only closed results count and −100 (breached) when equity counts. Same trades, same day: one reading is inside the limit and the other is past it, because the floating loss on trade B happened before it closed.
- The peak sets a trailing floor. From the highest closed balance the floor is 47,200. From the highest equity it is 48,200, because trade A was +1,200 in profit for a while, and that moment raised the floor even though the profit was later given back. Room at the low is 700 instead of 1,900 under the static floor.
- A trailing floor does not fall. The day closed −900, yet the equity-based floor sits 1,200 above the static one and stays there.
Sizes in the table are in account currency; the arithmetic is the same at any account size. It is arithmetic on made-up inputs, not advice.
The next morning: two floors, the nearer one counts
The next day opens at a balance of 49,100 with nothing open, taking the reading where day one stayed inside the daily limit. The daily floor is now 48,100, counted from the new opening level. The overall floors carry over. Whichever floor is higher is the nearer one.
| Maximum loss kind | Daily floor | Overall floor | Nearer floor | Room at the open |
|---|---|---|---|---|
| Static | 48,100 | 47,000 | 48,100 (daily) | 1,000 |
| Trailing, from closed balance | 48,100 | 47,200 | 48,100 (daily) | 1,000 |
| Trailing, from equity | 48,100 | 48,200 | 48,200 (overall) | 900 |
Under the first two kinds the daily limit is the nearer floor, so the whole 1,000 is available. Under the equity-based trailing floor the overall limit is nearer, and the room for the day is smaller than the daily limit suggests. Which limit binds changes from day to day.
What a list of closed trades does not show
A closed-trade list for day one reads +200 and −1,100. It does not hold the 51,200 peak or the 48,900 low, and those two figures are what the equity readings use. The floating path is not in a trade list. If your rulebook counts equity, record the day's highest and lowest equity yourself; the journal for evaluations guide sets out a daily row for them.
Read your own rulebook
Every number above is made up, and each firm answers the four questions its own way. Loss limits, reset times and trailing rules are in the firm's own rulebook, so take them from there. The prop-firm rules directory covers rules about copying, account totals and platforms rather than loss limits today, and each firm's page there links to the firm's own site. Rules change, so note the date you read yours. On how the maximum loss relates to the wider idea, see maximum drawdown explained.
Where a journal fits
We're working on a free journal and a backtester, with no date yet. Today Trepeat is a trade copier for MT4, MT5 and cTrader, currently on demo accounts, and you can add notes, a grade and screenshots to any copied trade once it closes, with a calendar of your results.
It does not read or enforce your firm's rules, and it does not calculate loss limits or room left, so the sums on this page are yours to run from your platform's figures. When a trade is repeated onto several accounts, each account has its own balance and so its own room, even though the entry in the journal belongs to the one trade you took. To keep those figures, the rules tracker template has a row for each rule.
Written by the Trepeat team.