Max daily loss is calculated on 4% of the Initial account balance. We calculate daily drawdown by taking the higher figure of either the account balance or account equity and subtract a fixed 4% of the initial balance from the higher value as the daily loss limit for the new trading day.
Example #1: On a 200K Account, if you have an open trade with a floating profit of $2,000 at 5 pm EST, your account equity will be 202K. With a daily drawdown limit of 4%, the equity cannot decrease below $192,000 ($202,000 - $8,000 = $192,000) on the next trading day.
Example #2: Suppose you hold an open trade with a floating loss of -$2,000 on a 200K Account at 5 pm EST your account equity would be $198,000. However, the daily drawdown limit of $8,000 would be computed based on a $200,000 balance. As a result, your equity cannot drop below $192,000 ($200,000 - $8,000 = $192,000) for the next trading day.
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