The 4% Daily Drawdown Explained With Real Examples

The daily drawdown is designed to stop a single bad session from turning into a disaster. It is also one of the most frequently misunderstood rules in crypto prop trading. Knowing exactly how it is measured, and when it resets, lets you trade confidently instead of guessing how much room you have left.

The Rule in One Sentence

On the current standard challenge, the daily drawdown is 4% of the original starting balance, measured from the trading day's opening equity. If equity falls by more than that amount during a single trading day, the limit is breached.

When Does the Trading Day Reset?

The trading day resets at 15:00 UTC. That time, not midnight in your local time zone, marks the start of a new daily limit. The overview page in the trader dashboard shows a countdown to the next reset so you always know where you stand.

Example 1: A Simple Losing Day

Your starting balance is $50,000, so the daily limit is $2,000. You start the trading day with equity of $51,000. If equity falls to $49,000 at any point before the next reset, you have lost $2,000 from the day's opening equity and reached the limit.

Example 2: Profits Earlier in the Day

Same account, opening equity $50,000. You make $1,200 in the morning, taking equity to $51,200, then lose $2,500 in the afternoon. Equity is now $48,700, which is $1,300 below the day's opening equity. That is within the $2,000 limit, because the measurement starts from the opening equity, not from the intraday peak.

Example 3: Open Positions Count

Drawdown is measured on equity, which includes unrealised profit and loss. If you start the day at $50,000 and an open position moves to an unrealised loss of $2,100, the limit can be breached even though you have not closed the trade. A stop-loss placed in advance is the most reliable protection.

How to Stay Well Inside the Limit

Set a personal daily stop at half of the official limit, for example 2% instead of 4%. Size each trade so that three or four losses fit within that personal stop. When you hit it, stop trading until the next reset. With no time limit on the challenge, one skipped afternoon costs nothing.

How It Works With the Maximum Drawdown

The 4% daily rule sits alongside the 6% static maximum drawdown measured from the original starting balance. A trader can respect the daily limit every day and still approach the maximum limit over several losing days. Track both numbers. They work together to keep losses controlled, but neither one removes the risk of failing a challenge.