In this lesson
Lesson 6 ended with a simple rule: stop for the day after a few losses. This lesson turns that into a proper limit, the way prop firms do it, and shows the traps hidden in how those limits are counted.
Even if you never trade a prop firm account, read on. A daily loss limit and a maximum drawdown are the two numbers that stop a bad day or a bad month from becoming the end of your account. Prop firms just happen to write them down very clearly.
A circuit breaker for your account
The fuse box in a house does not stop you from using electricity. It stops one fault from burning the house down. A daily loss limit works the same way. It does not judge your trades. It just switches you off when the day has already cost enough, before tired, angry trading can make it worse.
There are two kinds of limit:
- A daily loss limit caps how much you can lose in one trading day. It resets every day.
- A maximum loss (also called max drawdown) caps how much you can lose in total. It does not reset.
At a prop firm, touching either one usually ends the account. On your own account, they are rules you set and keep.
How a daily limit is counted
The details differ from firm to firm, and the details are where accounts are lost. Here are three real programs, from each firm's own rules as we read them on 6 and 7 October 2026. Always check the current rules on the firm's site, and see our prop firm rules pages for the full list.
| Program | Daily loss limit | Counted from | Max loss |
|---|---|---|---|
| FTMO 2-Step | 5% of the initial balance | The day's starting balance | 10% of the initial balance, static |
| FTMO 1-Step | 3% of the initial balance | The day's starting balance | 10% of the initial balance below the highest balance at a daily reset, trailing |
| The5ers High Stakes | 5% of the day's starting value | The higher of the day's starting balance and equity | 10% of the initial balance, static |
From each firm's own rules pages, read 6 and 7 October 2026. Open trades count toward every limit. Firms change rules: check the current version.
Open trades count
This is the rule that catches most new prop traders. The daily limit is measured on your equity, which includes the floating profit or loss of trades that are still open, not just closed trades.
FTMO 2-Step, a $100,000 account
The daily limit is $5,000, 5% of the initial balance, counted from the balance at the start of the day. Your day starts at $102,000, so your equity must stay above $97,000 until the reset at midnight Prague time.
You have closed one losing trade for −$1,500. Another trade is open and showing −$3,200. Your equity is $97,300, only $300 above the day's floor, even though your closed losses are small. One more small move against the open trade and the account is gone.
Several trades add up
The second trap is counting each trade on its own. Three trades that each risk 2% look modest. Together they put $6,000 at risk if every stop is hit, which is more than the whole $5,000 daily limit. Before you open a new trade, add up the risk of everything that is already open.
The starting point can move
FTMO counts its daily limit from the day's starting balance. The5ers High Stakes counts 5% of the day's starting value, taken from the higher of the starting balance and equity. On a day that starts at $102,000, that is a limit of $5,100 and a floor of $96,900. If you hold a winning trade overnight, its open profit can raise the starting value, and with it the floor.
How many losses fit in a day
Here is the simplest way to make a daily limit real: divide it by your risk per trade. On a $100,000 account with a 5% daily limit:
- At 0.5% risk per trade: 10 full losses before the limit.
- At 1%: 5.
- At 2%: 2.
Then do not plan to use all of them. Prices can jump past a stop, and the last loss of the day may be bigger than planned, so it is safer to stop before the firm's limit. TradeWarden, our MT5 Expert Advisor, closes every trade 10% before the limit by default, at a $4,500 loss for the day on this account.
Static and trailing max loss
The maximum loss comes in two shapes, and the difference matters a lot once you are in profit.
A static max loss stays where it started. On FTMO 2-Step and The5ers High Stakes, the floor sits at 90% of the initial balance, $90,000 on a $100,000 account, and never moves.
A trailing max loss moves up behind you as the account grows.
FTMO 1-Step, a trailing max loss
The max loss is 10% of the initial balance, measured below the highest balance recorded at a daily reset, and it never comes back down. On day one the floor is $90,000.
After a good run, the balance at one daily reset is $106,000. The floor rises to $96,000 and stays there.
A few losing days later the balance is $101,000. You are still up 1% from the start, but your room above the floor is only $5,000. On a static max loss it would be $11,000.
The lesson here: on a trailing account, a profit does not give you more room to lose. It raises the floor. After a winning run, your risk per trade often needs to come down, not up. FTMO 1-Step also has a 3% daily limit, $3,000 on this account, so each day's room is smaller too.
Set your own limits
On your own account, nobody enforces a limit but you. That is exactly why it helps to write one down and make it automatic.
A simple set of personal limits, on a $10,000 account risking 1% per trade:
- Daily limit: 3 losses, so $300. After the third loss, the day is over, win or lose on the next setup.
- Weekly limit: 6 losses, so $600. A bad week ends early.
- Drawdown rule: at a set drawdown, cut your risk per trade in half until the account is back at its previous high (lesson 6).
The exact numbers matter less than two things: you set them before trading, and you follow them when it hurts. The hardest moment to follow a limit is the moment it is hit, which is why it helps to let software hold the line for you.
Key takeaways
- A daily loss limit caps one day, a maximum loss caps the account. At a prop firm, touching either one usually ends the account.
- Daily limits are counted on equity, so open trades count. A small closed loss plus a large open one can be all of your room.
- Add up the risk of every open trade. Three trades at 2% put $6,000 at risk, more than a $5,000 daily limit.
- Divide the daily limit by your risk to see how many losses fit in a day, then plan to stop before the last one.
- A trailing max loss rises with your best balance and never comes back down. After a winning run, your room to lose can be smaller than on day one.
Questions
What is a daily loss limit in trading?
It is the most you can lose in one trading day before you must stop. At a prop firm it is a hard rule: on FTMO 2-Step it is 5% of the initial balance, $5,000 on a $100,000 account, counted from the day's starting balance and including open trades.
Do open trades count toward the daily loss limit?
Yes. At all seven programs on our rules pages, including FTMO, The5ers, FundedNext and FundingPips, the daily limit is measured on equity, which includes floating profit and loss. A day with −$1,500 closed and −$3,200 open has already used $4,700 of the room, even though only one trade has closed.
What is the difference between static and trailing drawdown?
A static max loss stays at the same level, for example $90,000 on a $100,000 FTMO 2-Step account. A trailing max loss rises with your highest balance. On FTMO 1-Step it sits 10% of the initial balance below the highest balance at a daily reset, so after reaching $106,000 the floor is $96,000.
How many trades can I lose before hitting a 5% daily limit?
Divide the limit by your risk per trade: 5 losses at 1%, 10 at 0.5% and 2 at 2%. Plan to stop before the last one, because a loss can be bigger than planned when price jumps past a stop.
Should I set a daily loss limit on my own account?
Yes. A simple version is to stop after 3 losses of 1%, which is $300 on a $10,000 account, plus a weekly limit of 6 losses. Set it before you trade and keep it when it is hit.
Risk management and position size
Educational content, not financial advice. Trading forex and CFDs carries a high risk of losing money. Examples use round numbers to show the method; check your own broker's contract specifications and your firm's rules.