The two limits
The daily limit caps what you may lose in one day, usually 4 or 5 percent of the starting balance, reset at a fixed time on the firm's clock. The maximum limit caps what you may lose overall, usually 8 to 12 percent. Touching either closes the account. Both are measured on equity at most firms, which means open losses count.
Balance versus equity
A balance-based limit only counts closed trades; an equity-based one counts open positions too. Under equity measurement, a trade that dips through the limit and recovers has already failed you, so your open stops must sit inside the limit collectively, with room for spread and slippage.
Static versus trailing
| Static | Trailing | |
|---|---|---|
| Floor | Fixed at starting balance minus the limit | Highest balance or equity minus the limit |
| Effect of profit | Builds a cushion | Raises the floor |
| Hardest on | Nobody in particular | Traders who give back open profit |
| Common at | Two-step forex firms | One-step and futures firms |
Variants to check
- Trailing on closed balance (milder) versus on equity including open profit (harsher).
- Trailing until breakeven, then locked, common in futures firms.
- End-of-day trailing, updated once a day.
- Different rules in the evaluation and the funded account, which is common.
Trading inside the limits
Risk 0.5 to 1 percent per trade, stop for the day after two or three losses, count correlated positions as one, and know at all times where equity sits relative to the day's limit. The firm's dashboard shows it; the daily limit is the number to watch, because it is the one an ordinary bad day can reach.
Compare prop firm drawdown rules
Trading forex, CFDs and other leveraged products carries a high risk of losing money. This guide is general education, not advice.