Introduction

Prop firm drawdown rules are among the most important conditions in a prop firm challenge and funded trading account. You may have a profitable strategy, strong market knowledge and several winning trades but one poorly controlled loss can still violate the account rules.

The confusion usually comes from the way firms measure losses. Some calculate drawdown from balance, while others use equity. Some reset the daily loss limit at a specific server time others use a trailing threshold that moves as the account reaches new highs. Commissions, swaps, funding costs, spreads, and unrealized losses may also count.

This guide explains prop firm drawdown rules in straightforward language you will learn how daily drawdown and maximum drawdown work, how to Drawdown calculate them, why open trades matter, and how to build a practical safety buffer.

Rules differ between forex, crypto, futures, and other prop firms so always read the current agreement for the firm and account type you are using the examples below are educational illustrations not universal rules.

What Is Drawdown in a Prop Firm?

Drawdown is the amount an account is allowed to lose before the trader violates a prop firm’s rules For example, suppose a trader receives a $100,000 account and the firm sets a 10% maximum drawdown the account may be allowed to fall by $10,000 before the maximum loss limit is reached Depending on the firm’s calculation method, the violation could occur when the account balance drops below $90,000, when equity falls below that amount and when a trailing threshold is touched.

A simple formula is:

Drawdown = Reference account value − Current account value

The “reference account value” may be the initial balance, the starting balance for the day, the highest balance reached, or the highest equity value. This is why two firms can advertise the same percentage but produce very different trading experiences.

Drawdown can appear in two forms:

• Realized loss: A loss from a trade that has been closed.

• Unrealized or floating loss: A loss on an open position that has not yet been closed.

Imagine a $50,000 account. You open a position and it moves $1,500 against you your balance may still show $50,000 because the trade remains open, but your equity may have fallen to $48,500 if the firm measures risk using equity, that floating loss may already count toward the drawdown limit.

This distinction matters in forex, crypto and futures markets a trader may believe they are safe because the balance has not changed, while the account’s equity is already close to a violation level.

Drawdown can also be affected by costs. Commissions, overnight swaps, exchange fees, spreads, and funding charges reduce equity or balance. A trader who appears to be within the percentage limit may breach the rule after these costs are included.

In practical terms, drawdown is not simply “how much money you have lost on closed trades.” It is the firm’s method of measuring how much risk the account has experienced compared with a specified reference point.

The Two Main Types of Prop Firm Drawdown Rules

Most prop firms use two primary loss controls:

1. Daily drawdown or daily loss limit

2. Maximum drawdown or overall loss limit

They work over different time periods.

The daily loss limit restricts how much the account can lose during one trading day. It normally resets according to the firm’s stated server time.

The maximum drawdown limit measures the account’s total permitted loss over the challenge or funded-account period. It usually does not reset each day.

Passing one limit does not cancel the other. A trader could remain below the maximum drawdown threshold but still violate the daily loss rule. Similarly, a trader might respect the daily limit but gradually lose enough over several days to breach the overall limit.

A careful trader monitors both numbers before opening a position.

Daily Drawdown or Daily Loss Limit

A prop firm daily loss limit is the maximum loss an account may experience during one trading day.

For example, a firm might set a 5% daily loss limit on a $100,000 account. If the rule is based on the original account value, the daily loss allowance would be $5,000. Once the relevant balance or equity falls to the firm’s daily threshold, the account may be marked as failed.

However, “5% daily loss” does not always mean the same thing. Firms may differ on several details:

• Whether the limit is based on balance, equity, or both

• Whether the account starts each day with the previous day’s closing balance

• Whether open-trade losses count immediately

• Whether commissions and swaps are included

• Whether profits increase the next day’s allowance

• What time the daily calculation resets

• Whether the limit is fixed or changes with account performance

Consider an account that begins the day with a $100,000 balance and has a 5% daily limit. Under a simple fixed calculation, the daily threshold is $95,000. If equity reaches $94,950 because of a floating loss, the rule may be violated even if the position later recovers.

Some firms calculate daily loss from the previous day’s ending balance. If that balance was $102,000, a 5% limit could produce a different daily threshold. Other firms calculate the limit from the starting balance of the account regardless of profits.

The timing of trades can also create confusion. Suppose you close a trade for a $3,000 loss before the daily reset and then open another position. If the new position has a $2,100 floating loss, the combined loss for the relevant period may exceed the allowed amount. The fact that the trades were separate does not necessarily protect the account.

Some platforms display a daily loss value, but this number should not be treated as an independent guarantee. It may update with a delay, use a different timezone, or exclude certain charges until they are booked. The firm’s official rules remain the controlling source.

For futures traders, daily loss calculations may be connected to intraday trailing limits, exchange fees, and the particular data or execution platform. Crypto traders should be especially careful around continuous markets because there is no universally shared “market close” comparable to traditional stock-market hours. The firm’s server reset determines the trading day.

A sensible approach is to treat the daily limit as a hard emergency boundary not as a target. If a firm permits a $5,000 daily loss, risking close to $5,000 is dangerous. Spreads can widen, slippage can occur, and commissions can push the account beyond the threshold before an order closes.

Maximum Drawdown or Overall Loss Limit

The maximum drawdown, also called the overall loss limit or max loss limit, is the total amount an account may lose over the entire trading period.

Suppose a $100,000 account has a maximum drawdown of 10%. If the rule is static and based on the initial balance, the account may not fall below $90,000. This threshold generally remains in place throughout the challenge or funded period.

Unlike daily drawdown, maximum drawdown usually does not reset every day. A trader can lose 2% on Monday, 3% on Tuesday, and 4% on Wednesday. Even if none of those losses individually violates a 5% daily limit, the combined 9% decline brings the account close to a 10% overall threshold.

The maximum drawdown may be:

• Static: The threshold remains fixed from the initial account value.

• Trailing: The threshold moves upward as the account reaches new highs.

• Balance-based: The firm uses closed-trade balance.

• Equity-based: The firm includes floating profit or loss.

• Intraday: The threshold can change during a trading session.

• End-of-day trailing: The threshold updates after the trading day closes.

These differences are critical. A static 10% drawdown gives a trader a fixed floor. A 5% trailing drawdown may appear smaller, but its practical impact depends on how and when it trails.

Maximum drawdown calculation often looks simple:

Maximum drawdown allowance = Reference amount × Maximum drawdown percentage

If the reference amount is $100,000 and the maximum loss percentage is 10%, the allowance is $10,000. The difficult part is identifying the reference amount and determining whether the limit follows balance, equity, or a high-water mark.

A maximum loss violation can terminate a challenge or funded account even if the trader has been profitable overall. For instance, a trader might grow an account from $100,000 to $106,000 and then lose $7,000. Whether that is acceptable depends on the firm’s drawdown model. Under a static threshold of $90,000, the account remains above the floor. Under a trailing rule, the permitted floor may have moved upward.

How to Calculate the Daily Loss Limit

The basic daily loss formula is:

Daily loss allowance = Daily reference value × Daily loss percentage

If a firm uses a $100,000 starting reference and a 5% daily loss limit:

$100,000 × 0.05 = $5,000

Under a straightforward model, the account must not fall below $95,000 during that trading day.

But the formula alone is not enough. You must know which daily reference value the firm uses. Common possibilities include:

• The original account balance

• The balance at the start of the day

• The previous day’s closing balance

• The higher of balance or equity at a specified time

• A fixed dollar amount listed in the account rules

You should also determine whether the firm measures the loss using balance, equity, or a combination of closed and floating results.

A balance-based calculation might look like this:

• Starting daily balance: $100,000

• Daily loss limit: 5%

• Daily allowance: $5,000

• Daily threshold: $95,000

If you close trades with a combined loss of $4,000 and have $800 in commissions, your effective loss may be $4,800. If a new position then produces a $300 floating loss, equity could reach the $95,000 threshold even though the closed-trade loss was only $4,000.

A trader should therefore calculate a personal “stop trading” level below the official limit. For example, instead of trading until the firm’s $5,000 daily allowance is almost gone, the trader might stop after losing $2,500 and $3,000. The exact figure depends on the strategy and the firm’s conditions, but the principle is universal: leave room for costs and market movement.

Daily loss calculations can become more complicated after a profitable day. Suppose the account ends Monday at $102,000. If Tuesday’s daily allowance is based on the previous closing balance, a 5% limit could be $5,100. If the firm uses the original account value, the allowance might remain $5,000. If the firm uses the highest intraday equity, the result could differ again.

A profitable open trade can create another issue. If a trader’s equity reaches $104,000 and then falls to $99,000 before closing, the firm may consider the floating decline in its daily calculation. In another model, only the final closed balance may matter never assume that unrealized profits are ignored.

For accurate daily loss calculation, find answers to these questions in the rules:

1. What value starts the daily calculation?

2. What time does the daily period begin and end?

3. Does the limit include open trades?

4. Are commissions, swaps, and fees included?

5. Does a profit change the next day’s allowance?

6. Can the threshold move during the day?

7. What happens if a trade remains open across the reset?

Write the answers down before trading. A screenshot or dashboard label may be helpful, but it should not replace reading the firm’s terms.

Example of a Balance-Based Daily Drawdown

Assume a trader has a $100,000 account with a 5% daily loss limit. If the firm uses the original account balance as the reference:

• Daily loss allowance: $100,000 × 5% = $5,000

• Daily threshold: $100,000 − $5,000 = $95,000

Now consider three possible outcomes.

Example one:

The trader closes two positions for a combined loss of $3,200. Commissions total $150, producing a net account reduction of $3,350. If there are no open trades, the account remains above the $95,000 threshold.

Example two:

The trader closes positions for a $4,600 loss, and commissions and swaps total $250. The net reduction is $4,850. The account is dangerously close to the limit. A small floating loss on another trade could breach it.

Example three:

The trader finishes with $4,000 in closed losses but holds an open trade showing a $1,200 unrealized loss. If the firm uses equity, the account’s effective decline is $5,200, and the daily rule may already be violated. If the firm uses closed balance only, the result could be different but relying on that assumption is risky.

Now change the starting point. Suppose the firm uses the beginning balance for each day and the account starts Tuesday at $102,000 a 5% daily allowance would be:

$102,000 × 5% = $5,100

The threshold would be $96,900. But this calculation applies only if the firm’s terms actually use the daily starting balance. Some firms retain a fixed daily dollar limit based on the initial account size.

This is why the phrase “5% daily drawdown” is incomplete without the calculation method. A trader must know whether the reference is fixed or variable, and whether equity is included.

How to Calculate the Maximum Drawdown Limit

The basic maximum drawdown formula is:

Maximum loss allowance = Maximum drawdown reference amount × Maximum drawdown percentage

For a $100,000 account with a 10% maximum drawdown:

$100,000 × 10% = $10,000

If the rule is static and balance-based, the minimum permitted balance may be $90,000.

That example becomes more complicated if the account reaches a new high. Suppose the balance rises to $104,000. Under a static rule, the floor may remain at $90,000. Under a trailing rule, the permitted floor may move higher.

You must also understand whether the firm calculates the threshold using balance or equity. Assume the maximum loss floor is $90,000 and a trade is open with the account showing:

• Balance: $91,000

• Floating loss: $1,200

• Equity: $89,800

If the rule is equity-based, the account may have violated the maximum drawdown. If it is balance-based, the account may still be above the floor this difference can determine whether a position is acceptable.

Some firms use the highest account value as a high-water mark. In that case, maximum drawdown can be expressed as:

Trailing threshold = High-water mark − Allowed drawdown amount

For example, if the high-water mark is $106,000 and the permitted drawdown is $5,000, the threshold is $101,000a A fall to $100,950 could violate the rule, even though the account remains above its original $100,000 balance.

The high-water mark may be based on balance and equity. It may update instantly, at the end of the day, after a trade closes, and when a specific profit target is reached those timing details affect strategy design.

Futures traders should also examine whether the quoted account size represents buying power rather than cash deposited into a live brokerage account. A “$50,000 account” may have a much smaller actual drawdown allowance. Crypto traders should check whether the firm includes overnight funding, weekend pricing, liquidation effects, and extreme spread widening.

Always calculate the maximum threshold in actual currency terms, not only percentages. A percentage can feel abstract. Knowing that the account has only $2,400 of remaining permitted equity drawdown makes the risk much more concrete.

Static Drawdown Explained

Static drawdown is a fixed loss threshold based on the initial or designated account value. It does not automatically move upward when the account becomes profitable.

Suppose a firm provides a $100,000 account with a 10% static maximum drawdown. The calculation is:

• Initial account value: $100,000

• Maximum drawdown: 10%

• Maximum permitted loss: $10,000

• Static floor: $90,000

If the account grows to $108,000, the floor generally remains $90,000. The trader has created an $18,000 gap between the current balance and the violation level.

That fixed floor can make risk planning relatively straightforward. The trader knows the threshold from the beginning and can calculate how much room remains.

For example:

This does not mean the trader should increase position size as the account grows. The daily loss rule may remain active, and profits can disappear quickly if risk is increased without a tested reason.

Static drawdown is often easier for beginners to understand because the floor does not follow them upward. However, the firm may still use equity-based monitoring. A fixed floor does not necessarily mean floating losses are ignored.

A static rule can also be paired with a daily limit. In that case, the trader must stay above the fixed overall floor and remain within the daily loss boundary. The account can fail through either route.

Trailing Drawdown Explained

Trailing drawdown is a moving loss threshold that adjusts as the account reaches new highs. It is often described using a high-water mark.

The general formula is:

Trailing threshold = Highest qualifying account value − Trailing drawdown amount

The word “qualifying” is important. The highest value may be:

• The highest balance

• The highest equity

• The highest end-of-day balance

• The highest intraday equity

• A value recorded after a trade closes

A trailing drawdown is not automatically the same across firms. Two accounts with identical percentages can have different thresholds because one trails intraday equity while the other updates only at the end of the session.

Consider a $100,000 account with a 5% trailing drawdown. If the firm calculates a fixed $5,000 trailing amount:

• Initial threshold: $100,000 − $5,000 = $95,000

• High-water mark of $103,000: threshold becomes $98,000

• High-water mark of $106,000: threshold becomes $101,000

The trader may be profitable overall at every stage, yet a decline below the moving threshold can still violate the account.

Trailing drawdown changes how profits should be viewed. Early profits may not provide permanent protection. If the account moves from $100,000 to $103,000, the threshold may rise from $95,000 to $98,000. The trader has gained $3,000 but only created a $3,000 cushion above the new threshold, not an additional $8,000 of usable room.

Some trailing models stop moving once the threshold reaches the original account balance or another lock-in level. Others continue trailing beyond it. Some firms trail unrealized profits, meaning a temporary spike in equity can lift the threshold even if the trade later closes with less profit.

This is why trailing drawdown explained simply should include a warning: never assume a profitable open trade is harmless. If it raises the high-water mark, it may permanently move the loss threshold upward under the firm’s model.

For strategy selection, trailing rules can make high-volatility approaches especially dangerous a strategy that regularly allows large pullbacks may perform well in a normal brokerage account but struggle under a tight intraday trailing limit.

Example of a Trailing Drawdown

Assume a $100,000 account has a 5% trailing maximum drawdown. For simplicity, the firm uses a $5,000 trailing amount and updates the threshold whenever a new high is recorded.

At the beginning:

• High-water mark: $100,000

• Trailing threshold: $95,000

The account then grows to $103,000:

• New high-water mark: $103,000

• New threshold: $98,000

The trader now has $5,000 between the account value and the threshold. Although the trader made $3,000, the account cannot necessarily afford to give back the entire profit. A decline to $97,900 could breach the rule.

Next, the account reaches $106,000:

• New high-water mark: $106,000

• New threshold: $101,000

The trader is up $6,000 from the starting point, but the allowed drawdown from the new high is only $5,000. A decline below $101,000 may fail the account.

This creates an important distinction between profit and cushion. A profit may increase the trailing threshold at the same time it increases the account value. The account can look healthy in percentage terms while having relatively little room for a normal pullback.

Suppose the trader opens a position at $106,000. Equity immediately falls to $100,900 because of volatility and spread expansion. If the threshold is $101,000 and equity-based, the account may violate the rule even though the balance remains $106,000.

If the firm trails end-of-day balance instead, the result could be different. The threshold might not update until the session closes, and intraday equity fluctuations might not permanently move it the exact wording determines the outcome.

A useful habit is to record the current high-water mark, threshold, and remaining cushion before every trading session. If the cushion is too small for the strategy’s normal volatility, reducing position size and not trading is often the rational decision.

Balance-Based vs Equity-Based Drawdown

Balance is the account value after closed trades and booked costs. Equity is the balance plus or minus the result of open positions.

The basic relationship is:

Equity = Balance + Unrealized profit or loss

If an account has a $100,000 balance and an open trade showing a $1,000 loss, equity is approximately $99,000 before any additional charges.

A balance-based rule generally evaluates closed results. An equity-based rule evaluates the account’s live value, including open trades. Some firms use the more restrictive of the two, while others use balance for one rule and equity for another.

Example:

• Balance: $50,000

• Open-trade profit: $800

• Equity: $50,800

If the position reverses and shows a $1,500 loss:

• Balance: $50,000

• Equity: $48,500

The balance has not changed, but equity has dropped by $1,500. Under an equity-based daily or maximum drawdown rule, that movement matters immediately.

Equity calculations can include more than price movement. Commissions, swaps, overnight financing, exchange fees, and other charges may reduce the amount available. In forex, holding positions through rollover can create unexpected costs in crypto, funding payments and weekend liquidity conditions may matter. In futures, exchange and platform fees can reduce the effective cushion.

Opening trades near a threshold is risky because spreads can cause an immediate equity decline. A position may be profitable based on the mid-price but negative on the actual bid or ask price During news events and thin markets, the spread can widen significantly.

Balance-based drawdown is not necessarily safer. a trader can accumulate large floating losses while waiting for positions to recover. If the firm eventually measures equity and if the trade is forcibly closed the apparent safety disappears.

Before trading, clarify:

• Does floating loss count?

• Does floating profit raise the high-water mark?

• Are pending orders included?

• Are commissions included in real time?

• What happens to trades held through the reset?

• Is the rule checked tick by tick or at a particular snapshot?

• Does the platform display the official value?

The safest personal practice is to monitor equity even when the firm emphasizes balance. Equity shows the account’s current risk more realistically.

Daily Drawdown Reset Time Explained

The daily drawdown reset time is the moment at which the firm begins a new daily loss calculation. It is often based on the firm’s server time, not the trader’s local time.

For example, a firm may reset at midnight according to a server located in a particular timezone a trader in another country might experience the reset in the afternoon or evening. Daylight-saving changes can also shift the local equivalent.

This creates several common mistakes:

• Assuming the reset occurs at local midnight

• Closing a losing trade just after the reset and expecting it to count toward the previous day

• Opening a large position before the reset without checking which daily period applies

• Forgetting that the platform and account dashboard may use different displayed times

• Holding trades through the reset without understanding how they are treated

Suppose the daily limit resets at 5:00 p.m. New York time. A trader in London may see a different clock time depending on the season. A position open at the reset could have its floating loss included in the new day, the previous day, or both for monitoring purposes, depending on the firm’s method.

The reset may use a fixed server time, a broker rollover, and an exchange-specific session. Futures accounts may follow a trading session rather than a simple calendar day. Crypto accounts operate continuously, but the prop firm still defines an internal daily boundary.

Check the official rules for:

1. The exact reset timezone

2. Whether daylight-saving adjustments apply

3. The account platform’s displayed server time

4. How open positions are treated across the reset

5. Whether losses are calculated from balance or equity at reset

6. Whether the daily threshold is recalculated after profits

Do not rely solely on a countdown timer. If the dashboard, platform, and written agreement appear inconsistent, contact the firm before taking additional risk.

A practical habit is to avoid opening a full-size trade shortly before the reset unless the position is part of a deliberate plan the reset does not erase losses, and it does not guarantee that a trade will receive a fresh risk allowance.

Daily Drawdown vs Maximum Drawdown: Key Differences

The daily rule controls short-term damage. The maximum rule controls long-term account survival.

A trader can violate the daily limit without coming close to the overall limit. For example, losing 6% in one day may breach a 5% daily rule while the account remains above a 10% maximum drawdown floor.

The opposite can also happen. A trader may lose 2% each day for several sessions and remain within the daily limit, but eventually reach the maximum drawdown threshold.

Both rules should be converted into currency values. Percentages are useful for comparison, but dollar or point values are easier to apply when deciding position size and stop-loss placement.

How to Avoid Violating Prop Firm Drawdown Rules

The most reliable way to protect a prop account is to treat drawdown management as part of the trading strategy not as an administrative detail.

Start by converting every rule into a clear number. Write down:

• The daily loss threshold

• The maximum drawdown threshold

• The current equity

• The remaining daily room

• The remaining overall room

• The daily reset time

• The current high-water mark, if applicable

Do not assume that a platform’s default risk settings understand the prop firm’s rules. A trading algorithm, position-size calculator and trade copier should be configured using the actual drawdown method.

Risk less per trade than the firm’s limit might seem to allow. If the daily loss limit is 5%, risking 4% on one trade is not responsible risk management a normal losing trade, spread expansion, or slippage could create a violation. Many traders choose a much smaller fixed risk amount, such as a fraction of 1%, although the suitable percentage depends on the strategy, account type, and firm rules.

Set a personal daily stop below the official limit. If the firm permits a $5,000 daily loss, you might decide to stop after losing $2,000 and $2,500. This protects against emotional revenge trading and leaves room for costs or calculation differences.

Monitor equity, not just balance. Open trades can produce a drawdown violation before they are closed. If several positions are open, add their floating results together and include expected transaction costs.

Control correlated positions. Three trades on different currency pairs may all be exposed to the same U.S. dollar move. Several crypto positions may react to Bitcoin volatility. Multiple futures contracts can create concentrated exposure to one economic event counting each trade separately can make total risk appear smaller than it really is.

Avoid increasing size after losses a trader who loses two trades and doubles the next position is attempting to recover emotionally rather than following a controlled process. Drawdown rules punish this behavior because one large loss can consume the remaining cushion.

Reduce risk when the account approaches a trailing threshold. Under a trailing model, the available cushion may be much smaller than the account’s total profit suggests. The high-water mark should be part of every pre-trade calculation.

Be careful around high-impact news and illiquid periods. Spreads and slippage can expand during economic releases, market openings, weekend transitions, or sudden crypto moves. A stop-loss does not guarantee execution at the exact intended price.

Use hard stops where appropriate, but understand their limits. A stop order controls planned risk in normal conditions; it cannot eliminate gap risk, slippage, and platform disruption. Some firms also impose restrictions on news trading, overnight holding, and specific instruments.

Do not hold trades through a daily reset without knowing how the firm treats them. A position that looks acceptable before the reset may create a new daily loss exposure afterward.

Maintain a drawdown journal. Record the account value, threshold, position size, setup quality, and emotional state. If your strategy repeatedly approaches the firm’s limit, the issue may be excessive size, too many trades, correlated exposure, and a mismatch between strategy volatility and account rules.

Test automated systems under the actual drawdown model. A strategy may be profitable in historical testing but fail because it experiences a temporary equity dip, trailing threshold violation, and cluster of losses during a single session. Backtesting should include commissions, spreads, slippage, and the firm’s reset schedule where possible.

Finally, know the firm’s prohibited practices and operational requirements a drawdown violation is not the only way to lose an account. Rules concerning lot sizes, copy trading, expert advisors, news events, overnight positions and consistency may also apply.

Use a Personal Safety Buffer

Never plan to trade exactly up to the firm’s loss threshold.

A safety buffer protects against spreads, commissions, swaps, slippage, data delays, and unexpected volatility. It also creates psychological space. When a trader is one small loss away from failure, decision-making often becomes rushed and emotional.

For example, if the firm’s daily limit is $5,000, a trader might establish a personal stop at $3,000. If the maximum drawdown floor leaves $10,000 of total room, the trader may choose to stop or reduce risk after using only a portion of that amount.

The buffer does not need to be identical for every strategy a short-term scalper may face spread and execution concerns, while a swing trader may need more room for overnight movement. Futures and crypto traders may need to account for rapid price changes and contract or funding costs the key principle is simple: the firm’s limit is an emergency boundary, not a daily risk budget.

Final Takeaway

Prop firm drawdown rules determine how much risk a trader can take before an account is restricted or terminated.

The daily loss limit controls losses within a particular trading day. The maximum drawdown limit controls the account’s total permitted decline. Daily drawdown usually resets according to a specified server time, while maximum drawdown generally remains active throughout the account period.

The calculation may be based on balance, equity, initial account value, daily starting value, or a trailing high-water mark. Open-trade losses, commissions, swaps, spreads, and other fees may count. Because firms use different models, a percentage by itself never tells the complete story.

Before trading, calculate the actual currency thresholds, identify the reset time, understand whether the rule is static or trailing, and confirm how equity is measured. Then create a personal safety buffer below the official limit.

The safest prop firm trader is not the one who trades closest to the maximum permitted loss. It is the trader who understands the rules, sizes positions conservatively, monitors equity continuously, and stops well before a technical violation becomes possible.