Understanding Daily Drawdown and Maximum Loss
Daily drawdown and maximum loss explained in plain English: balance vs equity, static vs trailing floors, the overnight trap and worked examples using Fundzoria’s rules.
Two numbers decide whether a challenge account survives: the daily loss limit, often called daily drawdown, and the maximum loss, sometimes called overall or maximum drawdown. Both are hard limits: touch either one and the account ends.
They sound simple, but small details, such as whether floating losses count or when the day resets, change how they behave. This guide explains both limits from first principles and then shows exactly how Fundzoria measures them, with worked examples.
Balance, equity and floating P/L
Every loss limit is measured against one of three numbers. Knowing which one is the first step.
- Balance is your account value from closed trades, after commissions. It changes only when a position closes or a commission is charged.
- Floating P/L is the unrealised profit or loss on positions that are still open.
- Equity is balance plus floating P/L: what the account would be worth if you closed everything at current prices.
Firms that check limits on equity react to open losses in real time. Firms that check limits on balance only react when a trade closes. Fundzoria checks loss limits against equity, so an open losing position can breach an account before it is closed.
What daily drawdown means
A daily loss limit caps how much you can lose within one trading day. Across the industry it is defined in several ways, so always read the exact wording:
- Reference point: the day’s starting balance, the day’s starting equity or the higher of the two.
- Size: a percentage of the initial balance or of the day’s starting value.
- Reset time: midnight in a specific time zone, or a platform’s server time.
How Fundzoria measures the daily loss
On the 1-Step, 2-Step and Lite programs, equity may not fall more than the daily percentage of the initial balance below the day’s opening balance. Floating P/L and commissions count, and touching the level counts as a breach. Instant has no daily loss limit.
The trading day resets at 00:00 Europe/Athens time, which is 22:00 UTC in winter and 21:00 UTC in summer. The allowance is always a percentage of the initial balance, even after your balance grows.
- Daily allowance · 5% of $100,000
- $5,000
- Day opens at $100,000 · breach at equity
- $95,000
- Day opens at $102,000 · breach at equity
- $97,000
- Day opens at $97,500 · breach at equity
- $92,500
The allowance stays at $5,000 because it is based on the initial balance, not on the balance you start the day with.
The overnight trap
Because each new day starts from your balance at the reset, floating losses on positions you hold past midnight count towards the new day.
- At 00:00 Europe/Athens your balance is $100,000 and an open position shows a floating loss of $1,500. Equity is $98,500.
- The new day’s opening balance is $100,000, so the breach level is equity of $95,000.
- You have already used $1,500 of the new day’s $5,000 allowance before placing a single trade. Only $3,500 remains.
The reverse also applies: floating profit held through the reset does not raise the opening balance, because only closed trades change the balance.
What maximum loss means
The maximum loss is the lowest level your equity may ever reach. Touch it once, at any moment, and the account ends. Firms use two main designs.
Static maximum loss
A static floor is fixed for the life of the account at a set percentage below the initial balance. It does not move when you make profit. At Fundzoria, 1-Step (6%), 2-Step (10%) and Lite (8%) use a static floor.
- Initial balance
- $100,000
- Maximum loss · 10%
- $10,000
- Loss floor, fixed
- $90,000
- Floor after the balance grows to $105,000
- $90,000
The advantage of a static floor is that profit adds to your room. At a balance of $105,000, you are $15,000 away from the floor.
Trailing maximum loss
A trailing floor rises as the account makes new highs. Definitions vary: some firms trail equity, including open profit, while others trail closed balance only. Some floors stop rising at a certain level; others never stop.
At Fundzoria, the Instant program uses a trailing floor. It starts 6% below the initial balance, rises with your highest closed balance and stops at the initial balance. It never moves down.
| Highest closed balance | Loss floor |
|---|---|
| $100,000 | $94,000 |
| $103,000 | $97,000 |
| $106,000 | $100,000, locked |
| $109,000 | $100,000, stays locked |
On Fundzoria’s trailing floor, open profit does not move the floor. Only a new highest closed balance does, and once the floor reaches the initial balance, it stays there.
How the two limits work together
The daily limit protects against one bad day. The maximum loss protects against a run of bad days. You can breach the maximum loss without ever touching the daily limit.
- Day 1: you lose 4%. The balance is $96,000 and the daily limit was not reached.
- Day 2: you lose another 4%. The balance is $92,000 and the daily limit was again not reached.
- Day 3: the static floor at $90,000 is only $2,000 away. A 2% loss now ends the account, even though the 5% daily limit would allow more.
The closer you are to the floor, the smaller your real daily allowance becomes.
Margin stop-out, the third safety net
There is one more limit. If equity falls to 50% of the margin in use or lower, open positions are closed and the account is breached. In practice the daily and maximum loss limits are usually reached first, but it is worth knowing that this level exists.
How to keep a safe buffer
- Set a personal daily stop at around half of the firm’s daily limit.
- Track your distance to the floor before every trade, not only at the end of the day.
- Include costs. Spreads and commissions reduce equity immediately. At Fundzoria, commission on forex and gold is $3.50 per lot, per side.
- Avoid carrying large floating losses into the reset, for the reason shown above.
- Use a stop loss on every position. At Fundzoria it is optional but strongly recommended, because limits are checked as prices move.
| Program | Firm daily limit | Personal daily stop | Maximum loss floor |
|---|---|---|---|
| 1-Step | $3,000 | $1,500 | $94,000, fixed |
| 2-Step | $5,000 | $2,500 | $90,000, fixed |
| Lite | $4,000 | $2,000 | $92,000, fixed |
| Instant | None | Set your own | Starts at $94,000, trails up |
The personal stop is a habit, not a rule. Even on Instant, which has no daily limit, a self-imposed daily stop keeps one bad day from eating most of the trailing allowance.
Key takeaways
- Equity includes floating P/L, and Fundzoria checks loss limits against equity in real time.
- The daily allowance is a fixed percentage of the initial balance, measured from the day’s opening balance, with a reset at 00:00 Europe/Athens.
- Floating losses held past the reset count towards the new day.
- Static floors stay fixed; Fundzoria’s Instant floor trails the highest closed balance and locks at the initial balance.
- Keep a personal buffer well inside both limits.
Frequently asked questions
Does floating loss count towards the daily limit?
At Fundzoria, yes. Daily and maximum loss are checked against equity, which includes floating P/L on open positions and the commissions charged.
When does the daily loss limit reset?
At 00:00 Europe/Athens time, which is 22:00 UTC in winter and 21:00 UTC in summer. The new day starts from your balance at that moment.
Does my daily allowance grow when my balance grows?
No. At Fundzoria the daily allowance is always a percentage of the initial balance. The breach level moves with the day’s opening balance, but the dollar allowance stays the same.
Is Fundzoria’s maximum loss static or trailing?
1-Step, 2-Step and Lite use a static floor. Instant uses a trailing floor that starts 6% below the initial balance, rises with the highest closed balance and stops at the initial balance.
What happens when I hit a loss limit?
It is a hard breach. Trading stops, pending orders are cancelled and open positions are closed at the next available quote. The account cannot be reactivated, but you can start again with a new account.
