Daily Drawdown

A per-day loss limit that caps how much an account can lose in a single trading day, separate from the overall max drawdown.

Definition

Daily drawdown (also called daily loss limit) is a cap on losses within a single trading day. It resets at the start of each new day — typically 5 PM EST for US-based firms, which is the futures market rollover. Daily drawdown is measured independently from max drawdown and can be breached on its own: a trader can blow up an account on the daily limit while still well inside the overall max drawdown.

Example

On a $100K account with a 5% daily drawdown, the account can lose up to $5,000 in any single day before breach. A trader who loses $4,000 on Monday and $3,000 on Tuesday does not breach — each day is measured separately. But a single day of $5,500 in losses closes the account, regardless of how much headroom remains on the overall max drawdown.

Why It Matters

Daily drawdown ends more challenges than max drawdown does. It is the invisible trip wire: traders focused on total account performance often forget that a single bad session can breach the daily limit even when cumulative PnL is positive. The timing of the daily reset (commonly 5 PM EST) also matters — positions held through the rollover can have their losses counted on the wrong day.

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Related Terms

Max Drawdown
The overall account loss cap — the total amount an account can drop before the firm closes it.
Trailing Drawdown
A drawdown limit that moves up as your account balance increases, but never moves down.
Static Drawdown
A fixed maximum loss limit calculated from your starting account balance, not your peak balance.
Drawdown Reset
What happens after a drawdown breach — typically account closure, though some firms offer a paid reset option.
← All termsLast updated 2026-04-21