How the limit is calculated
The reference balance for each day is typically the higher of the previous day's closing balance or closing equity. Your account can fall by at most the firm's allowed percentage from that reference before the rule is breached. The check runs continuously on floating equity, not just on closed-trade balance — open trades count.
When it resets
Daily loss limits reset at midnight server time. After the reset, the new day starts with a fresh budget calculated against the new reference balance. This is why traders who have a bad morning sometimes recover by the afternoon — but more often, traders try to recover within the same day and breach.
The half-of-allowed self-cap
The single most useful self-imposed rule is to cap your own daily loss at half of what the firm allows. If FTMO permits 5%, your personal limit is 2.5%. The cap accounts for tick-by-tick variance, removes willpower as the final barrier, and preserves margin for the next day's session.
Related terms
Author
Maximilian Bossow
Independent prop-firm trader. Reached FTMO Platinum tier with verifiable Overall Rewards across multiple funded accounts. Founder of MB Capitals — a coaching system for traders who want to pass prop-firm challenges through structured risk management, not gurus. The proof is on the homepage: every cert, every payout, every receipt of what it took to get there.