For those in the Classic and Oxford challenges, you’re allowed a daily drawdown of 5% from your initial account balance. In the Wall Street challenge, the permissible daily drawdown is 3% of the initial account balance.

To compute your daily drawdown, apply the formula: Daily Loss Limit = (Last Day’s Balance – Today’s Balance) / Equity. Remember, the daily loss limit resets at midnight server time.

Let’s walk through some examples for clarity:

Case 1:
With a $100,000 account, your daily loss limit is $5,000. If you’ve already lost $3,000 in closed trades for the day, you’re left with a $2,000 margin for additional losses, including floating losses. Exceeding this limit by incurring more than $2,000 in losses (accounting for swaps and commissions) would be a breach of the rules.

Case 2:
If you earn a $5,000 profit on a given day, your permissible loss for that day increases to $10,000 (your profit plus your initial daily loss limit). Surpassing this combined $10,000 limit in losses (both open and closed positions) would constitute a violation.

Case 3:
Imagine you’ve lost $3,000 in a day, and then you engage in a trade showing a floating loss of -$2,500 which later turns into a $500 profit upon closing. The violation occurs the moment your total losses exceed $5,000, regardless of subsequent gains.

Case 4:
It’s crucial to remember that the daily loss limit resets at midnight according to server time. For instance, if you’ve secured a $2,000 profit in closed trades but have an open trade with a $6,000 floating loss, you haven’t yet violated the daily drawdown limit since your net loss for the day is -$4,000. However, if you carry a $6,000 floating loss into the new day post-midnight, you’ll breach the daily loss limit as the new day’s losses start from zero, and a $6,000 loss exceeds the $5,000 daily limit.