Daily loss limit
The maximum dollar amount you can lose in a single trading day before the account is breached.
Daily loss limit is a per-session cap on losses. Hit it and the account is typically locked for the day at best, or permanently breached at worst — rules vary by firm.
Smart prop traders never trade up to the published daily loss limit. They set a safety buffer at 70-80% of the limit and treat that as the real line. The published number is for the firm's paperwork; the buffer is for trading.
Example
- $50,000 account with a $1,250 daily loss limit. Safety buffer at 80% = $1,000. Stop trading when intraday loss hits $1,000.
Related terms
- Drawdown buffer (safety buffer)
A self-imposed limit inside the firm's actual limit — your guardrail before the firm's guardrail.
- Auto flatten
An automated trigger that closes all open positions and cancels working orders when a defined risk condition fires.
- Trailing drawdown
A drawdown rule whose threshold moves up with every new equity high during the session, locking traders out of giving back winners.