What is Daily Drawdown?
The maximum a prop firm account may lose in a single trading day — typically 4-5%, reset at a fixed server time.
The daily drawdown — or daily loss limit — caps how much a prop firm account can lose within one trading day, typically 4% to 5% of the account size. Breaching it fails the account immediately, regardless of overall profit.
Two mechanics catch traders. First, it is usually measured including open floating losses, not only closed trades — an open losing position at the daily reset time can trigger the breach. Second, it resets at a fixed server time, often 5pm New York, and is measured from that day's starting balance or equity.
The defence is position sizing. If the daily limit is 5% and the trader risks 1% per trade, a firm rule of "stop after three losses" caps the day at 3% — a comfortable margin. Most daily-drawdown breaches are simply oversized risk meeting an ordinary losing streak.