The Daily Loss Limit is the maximum amount an account may lose within a single trading day. This limit resets each day at 5:00 PM EST.
The Daily Loss Limit is calculated using the greater of the prior day’s end-of-day balance or end-of-day equity.
End-of-day balance includes only closed P&L.
End-of-day equity includes both the balance and any open P&L.
This approach ensures that unrealized gains at the end of the trading day are properly reflected when determining the allowable loss for the following trading session.
If a trader finishes the day with open positions in profit, the account equity will be higher than the balance, and equity will be used to calculate the Daily Loss Limit.
If a trader finishes the day with no open positions, balance and equity will be the same, and the balance will be used.
If a trader finishes the day with open positions in a loss, equity will be lower than balance, and the balance will be used.
Example:
A trader has a $100,000 account with a 5% Daily Loss Limit. At the 5:00 PM EST reset, the account balance is $100,000, and there are open positions in profit, resulting in account equity of $102,000.
Because equity is higher than balance, the Daily Loss Limit is calculated using the $102,000 equity value. Five percent of $102,000 is $5,100, meaning the account will violate the Daily Loss Limit if intraday equity reaches $96,900 at any point during the next trading day.
If the trader had no open positions, or open positions that were in a loss, the Daily Loss Limit would instead be based on the $100,000 balance, resulting in a breach level of $95,000.