Max Daily Loss

### Ours is a trade cap, the industry's is a money cap Our version is 3 trades per day, win or lose. A ceiling, not a quota. Most days are a single trade. The reason it is a trade count rather than a dollar figure is that the thing which destroys accounts is rarely the losing trade. It is trade number four, taken late, to fix trade number three. The prop-firm world enforces the money version of the same idea, and it is worth understanding precisely even if you never trade a funded account, because it is the industry quietly admitting what actually kills traders. ### How the money version really works FTMO's Academy sets the [Maximum Daily Loss](https://academy.ftmo.com/lesson/maximum-daily-loss/) on a 2-Step Challenge at 5% of initial capital, with an overall Maximum Loss of 10%. Three details in that rule catch people out: - It is measured on **equity**, not closed balance. Floating losses on open positions count, and so do commissions and swaps. You can breach it without ever closing a trade. - It resets at midnight CE(S)T, from the balance recorded at that moment, not at your local midnight. FTMO's own worked example on a $200,000 account: day one the floor is $190,000, and if you end day two at $204,000 the floor becomes $194,000, then $192,000 off a $202,000 balance. FTMO is blunt about the consequence. A position that sat inside the limit before midnight can exceed it after the reset, if the floating loss you are carrying is large enough. The floor moved, not the price. - Firms do not all compute it the same way. The5ers' breakdown of drawdown models separates static floors, fixed from the starting balance, from trailing floors that ratchet upward with every new equity high. On a trailing 10% maximum, an account that peaks at $120,000 has its floor dragged up to $108,000, so an ordinary retrace can close it while the trader is still net profitable overall. Read the actual model your firm uses before you size a single trade against it. Assuming it works the way the last firm's did is a needless way to fail. ### The part that is really about you Every one of these rules exists to force a decision you should be making unprompted. A red morning does not improve the next setup. It degrades the person reading it. Revenge trading turns a small, ordinary loss into the kind you have to explain to yourself for months. Closing the platform on a bad day costs you very little. Staying open to repair the morning is what does the damage. The cap is a ceiling you rarely touch, not a target you owe the market.