Max Drawdown Versus Daily Loss: Which One Ends You First
Maya Ortiz
Risk & Evaluation
Challenge accounts carry two separate equity floors. Confusing them is the most common way a green week still ends in a failed evaluation.
Daily Loss Floor
Recalculated from the start-of-day balance at 00:00 UTC. It only cares about today. A big win yesterday does not raise today's floor, and a big loss yesterday does not lower it either.
Max Drawdown
Measured from the account high-water mark across the life of the challenge. It does not reset overnight. Every new equity peak raises the ceiling you must stay under relative to that peak.
How They Interact
- Early in an evaluation, the daily floor is usually closer than max drawdown
- After a strong run, max drawdown tightens under the new peak while the daily floor stays tied to this morning's balance
- An overnight gap can breach max drawdown without ever printing a daily-loss violation
Hitting either limit ends the challenge immediately. There is no soft breach and no end-of-day review.
A Worked Example
Start a $100,000 evaluation with a 5% daily limit and a 10% max drawdown.
- Day 1 open: daily floor $95,000, max-drawdown floor $90,000
- You finish day 1 at $108,000
- Day 2 open: daily floor $102,600, max-drawdown floor $97,200
The account can now lose more against the daily rule than against the trailing max-drawdown rule. Traders who only watch the daily number often discover the trailing floor the hard way.