Daily Drawdown

One bad day and you're done. The rule that punishes single-session losses.

What it is

A daily drawdown limit caps how much you can lose in a single trading day. Typically 5% of your starting daily equity or balance. If your funded account is $100,000 and you start the day at $102,000, your daily limit is usually $5,000, meaning you're violated if equity drops to $97,000 at any point during that day.

Why it exists

It prevents revenge trading. Without a daily cap, a trader who loses 3% in the morning might try to "make it back" in the afternoon with larger positions, turning a bad day into an account-ending disaster. The daily limit forces you to walk away.

The catch

The calculation method matters enormously. Some firms measure from your start-of-day balance, others from start-of-day equity (including overnight floating P&L). If you have a floating profit of $2,000 at market open and it retraces, that counts toward your daily loss at equity-based firms, even though you never "lost" money you'd actually locked in.