How should a daily loss limit be calculated?
Quick answer
Measure it on equity, so open losses count, against a daily reference set at a fixed reset time. The fairest and safest reference is the higher of balance and equity at the reset, which stops a floating loss carried overnight from giving the trader a fresh allowance measured from an already depressed level.
Detailed answer
Why the reference matters, with an example on a $100,000 account and a 5% limit:
- Overnight the trader holds a position $3,000 in loss. Balance $100,000, equity $97,000.
- If the day opens on equity ($97,000): the floor becomes $92,150. The trader can now lose $4,850 more today, on top of yesterday's unrealised $3,000.
- If the day opens on the higher of the two ($100,000): the floor stays $95,000, so only $2,000 more can be lost.
Opening on depressed equity repeated night after night lets a trader drift down without ever breaching. PropExecutor opens the day on the higher of balance and equity for exactly this reason, which the team learned while building the rule engine.
Publish the formula
Put the opening value rule, the reset time and the use of equity on your rules page, with this kind of example, so traders can calculate their own floor each morning.
PropExecutor team · Updated
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