Drawdown6 min read

Know your breach floor

Some rules can breach your account without a losing trade. Before you size anything, find the exact dollar line your firm will close you at.

Every funded account has a number below which it stops existing. Most traders know the percentages on the sales page: 3% daily, 6% max. Far fewer know the dollar figure that applies right now, on this trade, today. That figure is your breach floor, and it moves.

Two lines, and the closer one wins

Almost every perps firm runs two limits at once:

  • Daily loss. Measured from where you started the day. It resets each session.
  • Max loss. Measured from the starting balance, or from your high-water mark if it trails.

Your breach floor is whichever line is higher at this moment. Early in an account it is usually the max loss. After a good run it is usually the daily limit. Traders get caught watching the one that stopped mattering.

Static versus trailing

A static max loss never moves. On a $100,000 account with 6%, the floor is $94,000 for the life of the account.

A trailing max loss follows your highest equity upward, and many firms stop trailing once the floor reaches the starting balance. The detail that matters is what it trails: closed balance, or intraday equity including open profit.

Account size $100,000 Trailing max loss $6,000 Starting floor $94,000 Open profit peaks at +$4,500 High-water mark $104,500 New floor $98,500 Trade closes at -$1,600 Balance $98,400 breached

A $1,600 loss on a $100,000 account ended it. An hour earlier the trader was up $4,500. On an intraday trailing rule, open profit you never banked still raises the floor.

The breach with no losing trade

Daily limits create the sharper version. Some firms measure the day's starting point from equity at the reset, not closed balance. Hold a winner through the reset and its open profit becomes part of your baseline.

Closed balance $100,000 Open profit at day reset +$4,000 Day-start equity $104,000 Daily limit (3%) $3,000 Daily floor $101,000 Price pulls back, open profit shrinks to +$900 Equity $100,900 breached Position is still green.
The trade made money. The account did not survive it.

A pre-trade checklist

  1. Read the definitions page, not the pricing page. Find whether daily loss is measured from balance or equity, and when the day resets.
  2. Find out what the max loss trails. Closed balance, end-of-day equity or intraday equity. Ask support if the docs are vague, and keep the reply.
  3. Write the floor in dollars. Both lines, every morning. Use the breach calculator.
  4. Convert room into price. Dollars to breach divided by position notional is the move that ends the account. If that number is smaller than your stop distance, the position is too big.
  5. Count costs inside the limit. Funding and fees usually count against the daily limit. See Funding, fees and the 3% day.

None of this is exotic. It is the fine print, and the fine print is what closes accounts.

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