Drawdown and risk limits
Daily loss limit
The most an account may lose in one trading day before it breaches. Calculated as a percentage of the previous day's closing level, it resets at a fixed time each day and is the rule that ends most evaluations.
Also called: Daily drawdown · DLL · Max daily loss
GFN’s figure
GFN's daily loss limit is 3% on Instant - the tightest of the three - and 5% on both the 1 Step and the 2 Step.
- InstantDaily loss limit
- 3% ($3,000 on $100,000)
- 1 StepDaily loss limit
- 5% ($5,000 on $100,000)
- 2 StepDaily loss limit
- 5% ($5,000 on $100,000)
A 2 Step retake runs on a tighter 3% daily loss limit.
In detail
Daily loss limit,explained
The daily loss limit is a hard stop for the session rather than a warning. Crossing it for a few seconds is enough, and a market that recovers afterwards does not undo the breach. It is separate from maximum drawdown, and it is possible to breach either one without touching the other.
Because it is a percentage of the prior day's close, it moves with the account: a profitable run widens tomorrow's daily allowance, and a losing day narrows it. Commission, spread and slippage all come out of the same allowance.
Worked example
Start the day on a $100,000 2 Step account and equity reaching $95,000 breaches it - a $5,000 loss, including commission, and including anything floating on an open position.
Related
Terms thatcome with it
Most rules only make sense next to the ones they interact with. These are the entries this one depends on.
Maximum drawdown
The total loss an account may take before it is failed. Expressed as a percentage of the starting balance, it sets a floor: touch it and the account breaches, whatever the account has made up to that point.
Intraday drawdown
The worst point an account reaches during a single trading day, measured from that day's starting level. It is what a daily loss limit monitored on equity actually tests, rather than where the day happens to finish.
Drawdown reset
The moment a drawdown calculation is recalculated from a new reference level - most often the daily loss limit rolling over to a new day, or an account level being restated after a withdrawal.
Hard breach
A violation serious enough to fail or terminate the account immediately. Exceeding the daily loss limit or the maximum drawdown is the usual cause, and a later recovery in the market does not reverse it.
Position size
How many lots a trade is placed in. It is calculated from the dollar amount being risked and the stop distance, not chosen first - which is the reverse of how most traders approach it.
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