How the daily loss limit is calculated
A daily loss rule has two parts. A starting level is recorded at the daily reset, and an allowance is subtracted from it. The result is the breach level for the day: if equity touches it before the next reset, the account fails. Two rules can both be called "5% daily loss" and still put that level in different places.
Balance at the reset
The day starts from your closed balance at the reset. Open trades are ignored when the level is recorded, but the breach itself is usually checked on live equity. A trade you carry into the day with a floating loss therefore starts the day already eating into the allowance.
Equity at the reset
The day starts from your equity at the reset, open trades included. Floating profit held through the reset raises the starting level, and the floor with it. If the market then takes that profit back, the drop counts as today's loss even though no losing trade was closed. This is the breach traders least expect.
The higher of balance and equity
The day starts from whichever was higher at the reset. It keeps the strict side of both: open profit lifts the floor, open loss does not lower it.
A percentage of what?
The allowance is either a percentage of the initial account size, which gives the same dollar amount every day, or a percentage of the day's starting level, which grows after winning days and shrinks after losing ones. On a $100,000 account that stands at $102,000, 5% is $5,000 in the first case and $5,100 in the second.
Hypothetical example, for illustration only. A $100,000 account ends the day at a $101,200 balance while a trade still open shows +$800 at the reset, so equity at the reset is $102,000. The allowance is 5% of the initial size, $5,000.
| Rule | Day starts at | Breach level |
|---|---|---|
| Balance at the reset | $101,200 | $96,200 |
| Equity at the reset | $102,000 | $97,000 |
| Higher of the two | $102,000 | $97,000 |
If that open trade then turns and equity falls to $100,450, the room left is $4,250 under the first rule and $3,450 under the other two. Same account, same trades: an $800 difference in how close the breach is. These are the numbers the calculator above opens with.
Why the reset follows the server clock, not yours
The daily counter restarts at a set time on the trading server, usually its midnight. Many MT4 and MT5 servers run on GMT+2 in winter and GMT+3 in summer, so that their midnight falls at 5:00 pm New York time, the usual close of the forex day. For a trader in London that is 10:00 pm; in Paris, 11:00 pm; across Asia, early the next morning.
Two consequences catch traders out. A loss taken after the server's midnight but before yours counts toward the next day's limit. And a position held past the reset has its open profit or loss written into the next day's starting level, which is exactly where equity-based rules bite.
To check the server time, look at the clock in the Market Watch header of MT4 or MT5. Your firm's rules state which clock the daily limit follows; when your platform and the rules disagree, the rules win.
How the largest next trade is worked out
The room left is your current equity minus the breach level. From it, the calculator removes what your open trades could still lose if they reach their stops, then the safety buffer you choose. What remains is divided by what one full lot would lose at your stop, commission included, and rounded down to the next 0.01 lot:
max lots = (equity - breach level - open risk - buffer) ÷ (stop × pip value + commission)
Pip values: $10 per pip for one standard lot on pairs quoted in US dollars, such as EUR/USD or GBP/USD. On USD/JPY and the yen crosses, one pip is 1,000 yen per lot, so its dollar value is 1,000 divided by the USD/JPY price: about $6.67 at 150.00. On gold, with 100 ounces per lot, every $1.00 of price is worth $100 per lot.
The size this gives is a ceiling, not a target. A stop is not a guaranteed price: spreads widen around the reset and around news, and a weekend gap can skip a stop entirely. That is what the buffer is for.
When the overall limit breaches first
The daily floor is not the only one. The overall (maximum) loss limit sets a second floor, and whichever is higher ends the account. Late in a losing challenge the overall floor often sits above the daily one, and the room you have today is smaller than the daily limit suggests. The difference between the two limits is covered in Daily Drawdown vs Max Drawdown Explained.
Another free tool: the challenge cost calculator estimates what getting funded is likely to cost you, from your own pass rate.