Example: $50,000 account, 5% daily loss limit. Your limit is $2,500. If you lose $800 on trade 1 and $900 on trade 2, you have $800 of daily loss room remaining. A third trade with a 2% stop on a $40,000 position would breach the limit. Know this before entering, not during.
Note: With trailing drawdown, a sequence of profitable days followed by a losing day can leave you with less drawdown room than you started with, even if you are net profitable. This is not a flaw. It is the intended design. Understand it before it surprises you in a live session.
Note: The most common reason traders fail is not that their strategy is “bad”, but that they breach risk rules under pressure.
Example: A $100,000 evaluation with a 5% max daily loss and a 10% max drawdown usually means:
Note: If you cannot explain a firm's drawdown rules clearly before paying, you should not expect clarity after joining. If the rules page raises questions, assume the answers are unfavourable until confirmed in writing.
