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How can I calculate the Daily Drawdown?
How can I calculate the Daily Drawdown?
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Written by FundedNext
Updated over a week ago

For traders participating in the Evaluation, Express, and Stellar 2-Step challenges, a daily drawdown of up to 5% of their initial account balance is permitted. However, for traders enrolled in the Stellar 1-Step challenge, the allowable daily drawdown is limited to 3% of their initial account balance.

To calculate the daily loss limit, you can use the following formula: Daily loss limit = Your Last day's Balance - Today's Balance / Equity. Another thing to keep in mind is that your daily loss limit will be reset at midnight according to the server time.

Let's consider an example to illustrate this calculation. Suppose you have purchased an Evaluation 100K account. Here's how the calculation works:

Case 01:

For example, if you have a $100,000 account, the maximum daily loss limit is $5,000, and you are not allowed to lose more than $5,000 on any given day. Suppose you have lost a total of $3000 in your closed trades. In such a case, you cannot lose more than $2000, including floating losses. Note that swap and commission rates are included in this calculation. It will be considered a violation if you lose more than $2,000.

Case 02:

Similarly, let's say you gained $5,000 in profit in a single day. In such case, you will be allowed to lose $5,000 (your profit) + $5,000 (your daily loss limit) = $10,000. Losing more than $10,000 (in both open and closed positions) will be considered a violation.

Case 03:

Let's look at another case. Assume, like in the previous scenario, that you lost $3000 in a single day. Then you take a trade that is now running at a floating loss of -$2500, but when you close it, it becomes positive $500. If this occurs, according to our calculations, you will have exceeded your daily loss limit the instant your loss exceeds $5000.

Case 04:

Another thing to keep in mind is that your daily loss limit will be reset at midnight according to the server time. For example, suppose you have gained a $2000 profit in a closed trade, and trade is currently running at a $6,000 floating loss. In this case, you still have not violated your daily drawdown for the day because your current daily loss is +$2000 - $6000= -$4000. However, if you hold this one trade with a floating loss of $6,000 after midnight, you will breach the daily loss limit because a new day begins after midnight, and you have already lost $6000, which is more than your daily loss limit of $5000

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