Daily loss limit — The maximum a trader may lose in a single session before the account is locked for the day or breached outright.
How daily loss limit works in prop trading
The daily loss limit is a per-session cap that sits inside the maximum drawdown. It is usually 30% to 50% of the total drawdown allowance, and it exists to stop one bad day from consuming the whole account. Firms differ on the consequence: some simply disable trading until the next session, others treat the breach as a full account failure.
The measurement basis is the part people get wrong. A limit measured on equity counts open losses, so an unrealised drawdown can lock the account mid-trade. A limit measured on realised balance only counts closed trades. And the starting point may be your balance at session open or your highest equity of the day — the latter is much tighter, because it converts an intraday give-back into a daily loss.
Key points
- Typically 30% to 50% of the maximum drawdown allowance.
- Some firms lock the platform for the session; others treat it as a full breach — confirm which.
- The reference point may be the session-open balance or the day's peak equity; the peak-equity version is far stricter.
- Most platforms auto-flatten open positions when the limit is reached rather than letting you manage out.
Example
$50,000 account with a $1,100 daily loss limit and an $1,800 session-open balance cushion: the account locks for the day at a $1,100 loss even though the maximum drawdown had $700 left.
Also known as
- max daily loss
- daily drawdown
- daily stop
- DLL
Frequently asked questions
What happens when you hit the daily loss limit?
On most futures programs, open positions are flattened and trading is disabled until the next session opens. A minority of firms treat the daily limit as a hard breach that ends the account. The program terms distinguish the two, and the difference is significant enough to check before buying.
Is the daily loss limit based on realised or unrealised losses?
It varies by firm. Equity-based limits include open trades and can lock the account while a position is still running; balance-based limits only count closed trades. Equity-based is more common on futures accounts.
Put this into practice
Daily loss limit is described here as a plain-language educational definition. Firms, platforms, and account programs may apply different conditions or calculations. Verify the current official terms before using this definition to make an account decision.