The Maximum Daily Loss is the amount the trader is allowed to lose every day. For the purpose of this rule, the higher value between equity and balance will be used.
Max daily loss is based on 4% of the initial account balance. We calculate the daily loss as follows: Upon the 5pm EST day change, we will take the higher figure of either the account balance or account equity and subtract a fixed 4% of the initial balance from the higher value as the daily loss limit for the new day.
Example 1: On a $50,000 Account, if at 5 pm EST you have an open trade with a floating profit of $1,000, your account equity will be $51,000.
With a 4% daily drawdown, the equity cannot drop below $49,000 ($51,000 – $2,000 = $49,000) on the next trading day.
Example 2: If on a $50,000 account at 5 pm EST you have an open trade with a floating loss of -$1,000, your account equity will be $49,000.
Because your $50K balance is higher than your $49,000 equity, your daily drawdown limit of $2,000 will be calculated on a $50,000 balance. This means for the next trading day, the equity cannot drop below $48,000 ($50,000 – $2,000 = $48,000).
Example 3: If there are no open trades at 5 pm EST, the daily drawdown will be 4% of whatever the closed balance is
