Many traders fail not because of decision-making but because they overlook the rules. Among these, the daily loss rule is one of the most common reasons traders lose their accounts.

Here are common pitfalls that lead to account breaches:

• Daily Loss Limit: Exceeding the set loss threshold for a single day.

• Maximum Drawdown: Losing more than the allowable percentage from peak equity.

• Inactivity: Failing to execute trades within a specified time period.

• Exceeding the Evaluation Period: Not meeting trading objectives within the allotted time.

Did you know that 80% of traders fail their first evaluation because they breach the Daily Loss Limit Rule? This statistic highlights how critical it is to understand and follow this guideline.

Why Daily Loss Limit Rule Exists

The Daily Loss Limit Rule is designed primarily for capital preservation. Prop trading firms emphasize this rule as a safeguard for both traders and themselves. Before we grant you a live account, we look for one trait above all—awareness of capital protection. This awareness is essential; it ensures that traders develop sound risk management habits that are vital for long-term success.

Rules Explanation

Our Daily Loss Limit Rule applies to all evaluation plans and is straightforward to follow. We calculate the daily loss limit based on the balance from the previous day which resets at 00:00 server time, which is GMT+2 or GMT+3 (Daylight Saving Time).

1 Step Express

The Daily Loss Limit is 3%.

• Example 1: If your balance was $100,000, your equity cannot drop below $97,000 during the day.

• Example 2: If your floating equity rises to $105,000, the limit still uses the previous day’s balance of $100,000, so the equity limit remains $97,000.

• Example 3: If your balance was $105,000, your new Daily Loss Limit is $3,150, meaning your equity must not drop below $101,850.

2 Step Standard and 2 Step Flex

The Daily Loss Limit is 5%

• Example 1: If your balance at was $100,000, your equity cannot drop below $95,000 during the day.

• Example 2: If your floating equity is $106,000, the limit remains based on the previous day’s balance of $100,000, so the equity limit stays $95,000.

• Example 3: If your balance at 00:00 was $105,000, your new Daily Loss Limit is $5,250, meaning your equity must not drop below $99,750.

By following these rules and tracking your balance closely, you can avoid breaches and ensure continued success.

Your Best Practices: Avoiding Rule Breaches

Mastering the Daily Loss Limit Rule requires preparation and discipline. Here are some actionable tips:

1. Use Stop-Loss Orders Effectively

Always set clear stop-loss levels to protect your capital and prevent emotional decision-making.

2. Create and Stick to a Trading Plan

A well-defined plan keeps you on track and minimizes impulsive trades.  

To help you succeed, we’ve created a cheatsheet with 7 popular strategies designed to improve your trading discipline and help you pass your evaluation.

3. Limit Daily Losses to 2%

Even if the rule allows 3-5%, keep your personal limit at 2%. Analyze mistakes and stop trading for the day once you hit this threshold.  

Mastering the Daily Loss Limit Rule builds discipline, protects your capital, and sets the foundation for long-term trading success.