The Daily Drawdown is designed to protect trader accounts from excessive losses within a single day by limiting the maximum loss to a specific percentage of the account’s equity or balance. This rule encourages disciplined risk management and minimizes emotional or high-risk trading behavior.
How It Works
At the end of each trading day, the system calculates your daily loss limit based on the higher of your account’s equity or balance. The next day's maximum allowable loss is then set as a percentage of this value.
Daily Drawdown Models
Account Type | Daily Drawdown Limit |
2-Step Challenge
1-Step Challenge | 3%
3% |
Instant Funded | 3% |
2-Step Pro Challenge | 4% |
The percentage used depends on the model of your account. If you’re in the 2-Step Pro Challenge, your daily loss limit is set at 4%, not 3%.
Key Rules
Calculation Time: At the end of each trading day, your equity and balance are compared. The drawdown is calculated on the higher of the two values.
Daily Breach: If your losses in a single day exceed your allowed daily drawdown, your account will be breached and disqualified.
Includes Unrealized Losses: Drawdown breaches can result from both realized and unrealized losses.
Examples
Example 1: $25,000 Account (Standard 3% Drawdown)
Scenario 1 – Unrealized Profit
End-of-Day Equity: $26,000
End-of-Day Balance: $25,000
Higher Value: $26,000
Daily Drawdown Limit: 3% of $26,000 = $780
Next Day Max Loss Allowed: $780
Scenario 2 – Losing Trade
End-of-Day Equity: $24,000
End-of-Day Balance: $24,000
Higher Value: $24,000
Daily Drawdown Limit: 3% of $24,000 = $720
Next Day Max Loss Allowed: $720
Example 2: $50,000 Account (Standard 3% Drawdown)
Scenario 1 – Unrealized Profit
End-of-Day Equity: $52,000
End-of-Day Balance: $50,000
Higher Value: $52,000
Daily Drawdown Limit: 3% of $52,000 = $1,560
Next Day Max Loss Allowed: $1,560
Scenario 2 – Partial Loss
End-of-Day Equity: $48,000
End-of-Day Balance: $49,000
Higher Value: $49,000
Daily Drawdown Limit: 3% of $49,000 = $1,470
Next Day Max Loss Allowed: $1,470
Example 3: $50,000 Account (2-Step Pro – 4% Daily Drawdown)
Scenario 1 – Profit Made
End-of-Day Equity: $53,000
End-of-Day Balance: $50,000
Higher Value: $53,000
Daily Drawdown Limit: 4% of $53,000 = $2,120
Next Day Max Loss Allowed: $2,120
Scenario 2 – Losing Day
End-of-Day Equity: $48,500
End-of-Day Balance: $49,500
Higher Value: $49,500
Daily Drawdown Limit: 4% of $49,500 = $1,980
Next Day Max Loss Allowed: $1,980