Daily Drawdown
The maximum amount you are allowed to lose within a single trading day before your account is automatically suspended.
What is Daily Drawdown?
Daily drawdown (also called max daily loss) is a reset-every-day loss limit. If your losses for the current trading day hit this threshold, your account is suspended for the remainder of that day (or permanently, depending on the firm's rules).
How it's calculated
Firms differ on how the daily drawdown baseline resets:
- Balance-based: Calculated from yesterday's closing balance
- Equity-based: Calculated from the highest equity point reached today
Example (5% daily drawdown on $100,000 account)
- Daily limit = $5,000
- If you start the day at $100,000 and lose $5,000, you are stopped for the day
- The next day the limit resets from the new balance
Why traders blow accounts on this rule
The most common mistake is revenge trading after an early loss — stacking more trades to recover, and hitting the daily drawdown within hours.
How Firms Apply This Rule
FTMO uses a 5% daily drawdown. FundedNext uses 5%. Apex Trader Funding's daily loss rule is set as a dollar amount depending on account size.
Related Terms
Trailing Drawdown
A drawdown limit that moves up as your account balance increases, locking in a higher floor rather than staying fixed from the start.
Static Drawdown
A fixed maximum loss limit calculated from your starting account balance that never changes regardless of profits made.
Maximum Drawdown
The overall loss limit from your starting balance (or peak balance) that, if hit, terminates your account permanently.
Consistency Rule
A rule requiring that no single trading day generates more than a set percentage of your total profits, preventing traders from 'getting lucky' on one big day.