Risk
Daily loss limits and maximum drawdown, explained properly
The difference between a daily loss limit and maximum drawdown, how each is calculated against balance and equity, and the position sizing that keeps you inside both.
Nearly every failed evaluation is a risk failure rather than a strategy failure. The two rules that end most accounts are the daily loss limit and the maximum drawdown, and they are measured differently.
Daily loss limit
The daily loss limit resets at 00:00 UTC. It is measured from the balance your account opened the day with, and it includes floating losses on open positions. Two flat days followed by one undisciplined session is the classic pattern: the limit exists to stop that session from being terminal.
Maximum drawdown
Maximum drawdown is the lifetime floor of the account. It does not reset. With static drawdown the floor is a fixed percentage below your starting balance. With trailing drawdown the floor follows your peak equity, so a run-up you never banked still moves your failure level up.
| Daily loss limit | Maximum drawdown | |
|---|---|---|
| Resets | Every day at 00:00 UTC | Never |
| Measured from | Day-opening balance | Starting balance or peak equity |
| Includes floating P&L | Yes | Yes |
| Consequence | Account breach | Account breach |
Sizing that survives both
- Work backwards from the daily limit, not the target: decide the maximum number of losing trades you will accept in a day, then divide the limit by that number.
- Size on the stop distance, not on lot habit. The same lot size on gold and on a major FX pair are completely different risks.
- Count floating losses as real. If the drawdown line would be hit while the trade is open, the trade is too big.
- Leave headroom for spread and swap on positions held over a session roll.
Your live headroom on both limits is shown on the dashboard risk monitor, updated against live prices.
All trading on Next Scale Funded is simulated. Nothing on this page is investment advice.