This rule can also be called “trader’s daily stop-loss”. According to our trading challenge rules, depending on your trading strategy and initial account capital size this is set between: ProFx trading program 2.5% and 10% and MicroFx trading program 5% and 15% from the initial capital value. After the challenge phase maximum daily loss limit is reduced by 50%. The rule says that in any moment of the day (CE(S)T – Central European Summer Time), the result of all closed positions in sum with the currently open floating P/Ls (profits/losses) must not hit the determined daily loss limit. The counting formula:
Current daily loss = results of closed positions of this day + result of open positions.
For example, in the case of the Challenge with the initial capital of $100,000, the Max Daily Loss limit is $1250. If you happen to lose $1000 in your closed trades, your account must not decline more than $250 this day. It must also not go -$250 in your open floating losses. The limit is inclusive of commissions and swaps.
Vice versa, if you profit $1000 in one day, then you can afford to lose $2250, but not more than that. Once again, be reminded that your Maximum Daily Loss counts your open trades as well. For example, if in one day, you have closed trades with a loss of $1000 and then you open a new trade that goes into a floating loss of some -$300 but ends up positive in the end, unfortunately, it is already too late. In one moment, your daily loss was -$1300, which is more than the permitted loss of $1250.
Be careful, the Maximum Daily Loss resets at midnight CE(S)T! Let’s say that one day you had a profit of $1500. On the same day, you have an open position with a currently floating loss of $2000. On this day, the maximum daily loss is not violated. The current daily loss is $500. ( $1500 closed profit – $2000 open position). However, if you hold this position with the open loss of $2000 after midnight, the daily loss limit will be violated. This is because your previous day profit doesn’t count towards a new day and the open loss of $2000 exceeds the max daily permitted loss of $1250.
The size of the Maximum Daily Loss gives trader enough space for trading and it guarantees a clearly defined daily risk to the investor. Both the trader and investor benefit from this rule as the account value will not drop below the limit. That’s also why Maximum Daily Loss limit includes your possible floating losses.