A daily drawdown limit is the most you are allowed to lose in a single trading day. Cross it, even for a second on an open trade, and the account fails on most firms — no warning and no appeal. It ends more evaluations than any other rule, and usually because the trader misread how it is measured, not because they had a genuinely bad day.
What it is
A daily loss cap, set as a percentage of your account size. Five per cent is the common figure, though four and six per cent both show up. On a challenge it sits alongside a larger overall loss limit; the daily cap is the tighter of the two and the one you hit first. Breaching it fails the account whether you are still in an evaluation or already funded.
How it is calculated
This is where accounts are lost. The cap is a percentage of a starting figure, and firms disagree on which figure:
- Starting balance — your balance at the day's reset, ignoring any open trades.
- Starting equity — balance plus floating profit or loss at the reset.
Most firms then measure your live equity through the day, not your closed result. Open floating losses count against the limit in real time. The day resets at a fixed server time, commonly 00:00 in the firm's timezone, so "today" may not line up with your local midnight. Check both the basis and the reset hour before you place a trade — assuming the wrong one is how people breach without realising they were close.
The line is set at the start of your trading day and measured against live equity. A position that dips against you and later recovers can still breach the cap on the way down.
A worked example
A £50,000 account with a 5% daily limit gives you £2,500 of room. If the day resets with your balance at £50,000, your equity must not touch £47,500 at any point that day.
Say you close the morning down £1,000, so your balance is £49,000. You then open a single position that floats £1,800 against you before it turns around. Your equity low is £47,200 — below the £47,500 floor. The account is breached, even though that trade might close as a winner an hour later. The firm reads the low, not the close.
Why it is the rule most people breach
- Floating losses count. Traders watch their closed profit and forget that an open position in the red is already spending the limit.
- They assume the wrong basis. Someone used to a balance-based cap moves to an equity-based firm and breaches holding a normal overnight swing.
- News does it in seconds. A spike through a stop on high-impact data turns a planned £300 risk into a £2,600 loss, and the cap does not care that it was slippage.
Size your trades so that your worst realistic day, spike included, still leaves the floor untouched. The daily limit rewards planning backwards from the loss, not forwards from the target.
The Karnek note
Karnek tracks your equity live from the terminal, so you can see how close a day is running to its limit while the trade is still open, not after the breach. It reads the account read-only and can never place, close or size a trade — the discipline stays with you.
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Written and reviewed by the Karnek Research team. Last updated August 2026.
Educational content only - not financial advice. Past performance does not predict future results. Trading carries significant risk.