Daily loss limit
Also called Daily stop, Max daily loss, Daily loss cap, Daily drawdown limit, DLL
A daily loss limit is the most money you allow your account to lose in one trading day. When closed losses plus open losses reach that amount, you stop trading until the next day.
The limit only works if it is a dollar figure you fix before the session starts. If you set it after the second loss, you end up bargaining with yourself, and the next trades are usually attempts to win the money back.
The daily loss limit formula
Daily loss limit ($) = Start-of-day balance × Daily limit %
Stop level (equity) = Start-of-day balance − Daily loss limit
Full losses allowed = Daily loss limit ÷ Risk per trade ($)
Start-of-day balance is your account balance before the first trade of the day. Equity is that balance plus or minus the result of any trades still open. If you carry open trades into the new day, start from equity at the rollover, not balance, or the floating loss is missed.
The third line tells you how many full stop-outs fit inside one day. If the answer is below 2, your risk per trade is too large for your limit. Cut the trade risk; do not raise the limit.
Plan for one loss fewer than the formula gives, so slippage and commission cannot push you over.
To choose your own percentage, work backwards: daily limit % = risk per trade % × the number of full losses you accept in one day (at least 2).
Worked calculations for $500, $5,000 and $50,000 accounts
The figures below are an illustrative example using a 3% daily limit and 1% risk per trade. Your own percentages may differ.
The same four steps give these results for the other two accounts:
| Start-of-day balance | Daily loss limit (3%) | Risk per trade (1%) | Stop trading at equity |
|---|---|---|---|
| $500 | $15 | $5 | $485 |
| $5,000 | $150 | $50 | $4,850 |
| $50,000 | $1,500 | $500 | $48,500 |
Write down the dollar figure in the last column, not the percentage. A dollar level is something you can check at a glance while a trade is running.
You can also turn the limit into pips. On the $5,000 account, 0.10 lots (10,000 units) on a USD-quoted pair is worth $1 per pip. A $50 risk at that size is a 50-pip stop, so three full stops are 150 pips, which is the whole $150 limit.
Quick-reference table: how risk per trade changes the losses you can take
This table holds the $5,000 account and its 3% limit ($150) fixed and changes only the risk per trade.
| Risk per trade | Risk in dollars | Full losses allowed ($150 ÷ risk) | At least 2? |
|---|---|---|---|
| 0.5% | $25 | 6 | Yes |
| 1% | $50 | 3 | Yes |
| 2% | $100 | 1.5 | No |
| 3% | $150 | 1 | No |
At 2% risk the second stop-out already breaks the limit, and at 3% a single one uses all of it.
Why open trades count toward your daily loss limit
A floating loss is the loss on a trade you have not closed yet. Measure your limit on equity, not on closed trades, so a floating loss uses up the limit just like a closed one. Funded-account rules often measure on equity too; check yours.
The chart below follows the $5,000 account from the example. Two closed losses take $100. A third trade then drifts to −$50 while still open, and equity touches $4,850. The limit is hit even though only two losses show in the trade history.
Run this check before every new order:
Closed loss today + Floating loss + Risk of the new trade ≤ Daily loss limit
If the sum is larger, reduce the size or skip the trade. The check tells you the largest size allowed, not that you should take the trade; the setup still has to qualify on its own. In the example, a third $50 trade after two losses fits exactly, with nothing left for slippage. By the one-loss-buffer rule, skip it.
Mistakes that make a daily loss limit useless
- Counting only closed trades. You hold a losing position because "it is not a loss yet" while equity is already past the stop level.
- Moving the limit during the day. A limit you widen after a loss is not a limit. Change it only between sessions.
- Risking the whole limit on one trade. One stop-out ends your day, and one gap or slipped stop takes you past the limit.
- Treating the remainder as a budget. "I still have $50 left to lose" pushes you into a trade you would not otherwise take.
- Stacking trades that move together. Three positions that all depend on the same currency behave like one large trade and can hit the limit in a single move.
How to check your limit during a trade
Compare the equity figure on your trading platform with your stop level. If your platform or funded-account dashboard has a daily-loss setting, check whether it warns you, blocks new orders or closes open positions before you rely on it.
FAQ
What happens if I hit the daily loss limit on a funded account?
It depends on the firm's rules. Some disable trading until the next day, while others treat it as a breach and close the account. Read the rule and find out whether it is measured from start-of-day balance, start-of-day equity, or the higher of the two.
When does the daily loss limit reset?
It resets at the trading day rollover used by your broker or funding firm, which is usually not midnight where you live. Look up that time, because a loss just before the reset and another just after land in two different days.
Do commission and swap count toward the daily loss limit?
Yes, when the limit is measured on balance or equity. Commission is always a cost, so it moves you toward the stop level even if price did not move against you. Swap can go either way: a swap charge moves you toward the stop level, and a swap credit moves you away from it.