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How is the Daily Simulated Drawdown calculated in the Dual Step Swing Challenge/Funded?
Note: The Daily Loss Limit is a fixed limit set at 4% of your initial account balance. It is calculated once when the account starts and never changes, so the dollar amount depends only on your account size. All examples in this section use a $100,000 account, where the limit is $4,000 per day. The rules, formulas, and breach level calculations work the same way for every account size, on both challenge and funded accounts.
The rule at a glance
| Item | Rule |
|---|---|
| Daily Loss Limit | 4% of the initial account balance. This is a fixed amount that never changes. |
| Type | Balance-based. The daily breach level is set from your end-of-day balance. |
| Reset time | Every day at 5 PM EST/EDT |
| Formula | Daily Breach Level = End-of-Day Balance − Daily Loss Limit ($4,000 on $100K) |
| Direction | The daily breach level can move up or down each day, depending on your end-of-day balance |
| What is checked | Equity and balance, including floating (open) and realized (closed) losses |
| If breached | Hard breach. The account is terminated immediately. |
Daily loss limit by account size
| Account Size | Daily Loss Limit (4%) | Day-One Daily Breach Level |
|---|---|---|
| $5,000 | $200 | $4,800 |
| $10,000 | $400 | $9,600 |
| $25,000 | $1,000 | $24,000 |
| $50,000 | $2,000 | $48,000 |
| $100,000 | $4,000 | $96,000 |
What is the daily drawdown?
- The daily drawdown is a fixed limit of 4% of the initial account balance ($4,000 on a $100,000 account).
- It resets every day at 5 PM EST/EDT, based on your end-of-day balance at that moment.
- The dollar amount never changes. It is always calculated from the initial account balance, not your current balance.
- Floating profit or loss on open trades at 5 PM EST/EDT does not change the next day’s breach level, but your equity is always checked against it.
Balance vs equity
- Balance updates only when a trade is closed.
- Equity moves in real time and includes floating P&L from open trades.
- The daily breach level is set from your end-of-day balance at the 5 PM EST/EDT reset.
- During the day, both equity and balance must stay above the daily breach level, so floating losses can still breach your account.
How the daily breach level is calculated
Daily Breach Level = End-of-Day Balance − Daily Loss Limit ($4,000 on a $100,000 account)
Example: starting drawdown
- Your initial account balance is $100,000.
- Your Daily Loss Limit is $4,000 (4% of initial balance).
- Your daily breach level is $96,000 ($100,000 − $4,000).
- If equity or balance touches or falls below $96,000, the account is breached.
Do closed profits affect the daily drawdown?
Yes. A profitable day raises your end-of-day balance, so the next day’s breach level moves up.
Example:
- You close +$3,000 in profit during the day.
- Your end-of-day balance is $103,000.
- The Daily Loss Limit stays $4,000.
- The next day’s breach level is $99,000 ($103,000 − $4,000).
Do closed losses affect the daily drawdown?
Yes. A losing day lowers your end-of-day balance, so the next day’s breach level moves down.
Example:
- You close −$3,000 in losses during the day.
- Your end-of-day balance is $97,000.
- The Daily Loss Limit stays $4,000.
- The next day’s breach level is $93,000 ($97,000 − $4,000).
Do floating profits affect the daily drawdown?
No. The reset uses balance, so floating profit on an open trade at 5 PM EST/EDT does not raise the next day’s breach level.
Example:
- An open trade is floating +$2,000 at the 5 PM EST/EDT reset.
- Your balance is $100,000 and your equity is $102,000.
- The reset uses balance: $100,000.
- The next day’s breach level is $96,000 ($100,000 − $4,000).
- Your equity starts the next day $6,000 above the breach level, but if the floating profit turns into a loss, that extra room disappears.
Do floating losses affect the daily drawdown?
They do not change the breach level, but they reduce your room. The reset uses balance, so the next day’s breach level stays the same. Your equity is still checked against it, and it starts the day closer to the breach level.
Example:
- An open trade is floating −$2,000 at the 5 PM EST/EDT reset.
- Your balance is $100,000 and your equity is $98,000.
- The reset uses balance: $100,000.
- The next day’s breach level is $96,000 ($100,000 − $4,000).
- Your equity starts the next day only $2,000 above the breach level. If the floating loss grows by $2,000 or more, equity touches or falls below $96,000 and the account is breached.
Summary of the examples
| Example | Balance at Reset | Equity at Reset | Next-Day Breach Level | Room at Start of Next Day |
|---|---|---|---|---|
| Starting | $100,000 | $100,000 | $96,000 | $4,000 |
| Closed +$3,000 | $103,000 | $103,000 | $99,000 | $4,000 |
| Closed −$3,000 | $97,000 | $97,000 | $93,000 | $4,000 |
| Floating +$2,000 at reset | $100,000 | $102,000 | $96,000 | $6,000 |
| Floating −$2,000 at reset | $100,000 | $98,000 | $96,000 | $2,000 |
Multi-day walkthrough
| Day | Starting Balance / Equity | What Happened | End-of-Day Balance / Equity (5 PM EST/EDT) | Daily Loss Limit | Daily Breach Level (Equity) |
|---|---|---|---|---|---|
| Day 1 | $100,000 / $100,000 | Trader closes +$3,000. | $103,000 / $103,000 | $4,000 | $96,000 |
| Day 2 | $103,000 / $103,000 | Opens a trade that is floating −$2,000 at 5 PM EST/EDT. Balance unchanged. | $103,000 / $101,000 | $4,000 | $99,000 |
| Day 3 | $103,000 / $101,000 | The floating loss grows from −$2,000 to −$4,000, so equity falls to $99,000. | Breached before the reset | $4,000 | $99,000 |
- Each day’s breach level comes from the previous day’s end-of-day balance minus $4,000:
- Day 2: $103,000 − $4,000 = $99,000
- Day 3: $103,000 − $4,000 = $99,000. The floating loss at the Day 2 reset did not lower it.
- On Day 3, equity drops from $101,000 to $99,000 and touches the daily breach level, so the account is breached.
- On Dual Step Intraday, the same trades would give a Day 3 breach level of $97,000, because the reset uses equity.
- The Maximum Drawdown breach level is $93,000 on a challenge account. It’s lower, so the daily limit is reached first.
Intraday vs Swing side by side
| Example | Intraday Next-Day Breach Level (equity) | Swing Next-Day Breach Level (balance) |
|---|---|---|
| Starting | $96,000 | $96,000 |
| Closed +$3,000 | $99,000 | $99,000 |
| Closed −$3,000 | $93,000 | $93,000 |
| Floating +$2,000 at reset | $98,000 | $96,000 |
| Floating −$2,000 at reset | $94,000 | $96,000 |
- Closed trades give the same result on both.
- They only differ when a trade is still open at the 5 PM EST/EDT reset.
How do the daily and maximum drawdown work together?
- The Daily Loss Limit and the Maximum Drawdown Limit run at the same time.
- On any day, whichever breach level is higher is the one your account reaches first.
- The Maximum Drawdown Limit is explained in the Dual Step Swing Max Drawdown article.
What causes immediate termination?
- Your account closes the moment equity or balance touches or falls below the daily breach level.
- This can be caused by:
- Floating losses on open trades
- Closed losses
- Breaching the daily limit results in termination of the account.
Remember
- The Daily Loss Limit is always 4% of your initial account balance and never changes.
- The daily breach level resets every day at 5 PM EST/EDT from your end-of-day balance. Floating P&L does not change it.
- Both equity and balance must stay above the daily breach level at all times.
- Holding a floating loss over the reset leaves you less room the next day.
- Keep an eye on both the daily and maximum breach levels. The higher one is the one you’ll hit first.
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