Guide 02 / Drawdown
Daily loss and maximum drawdown floors
Most evaluation rules are written as percentages, but what matters at the moment you place a trade is a dollar level your equity must not reach. This guide converts percentages into floors, finds which floor is closer, and shows how a different rule type can change the room you have by thousands of dollars.
Floors, not percentages
For a static rule measured from the starting balance:
Static floors
total floor = starting balance x (1 - max loss %)
Remaining room
total room = current equity - total floor
usable room = the smaller of the two
The smaller room is the binding constraint. Being well inside one limit does not help if you are close to the other.
Worked example: two floors (hypothetical)
Starting balance $100,000. A hypothetical 5% daily loss limit and a 10% static maximum loss. Current equity is $96,000.
| Step | What you compute | Arithmetic |
|---|---|---|
| 1 | Daily floor | $100,000 x 0.95 = $95,000 |
| 2 | Total floor | $100,000 x 0.90 = $90,000 |
| 3 | Daily room | $96,000 - $95,000 = $1,000 |
| 4 | Total room | $96,000 - $90,000 = $6,000 |
| 5 | Stricter roomDaily limit binds | min($1,000, $6,000) = $1,000 |
Although the account still has $6,000 before the total floor, only $1,000 separates it from the daily floor. That $1,000 is the number that should shape the next trade.
Testing a planned trade
Compare the planned risk (from the position sizing guide) against the stricter room:
Room after a full stop-out
| Step | What you compute | Arithmetic |
|---|---|---|
| 1 | Plan A: risk $500Fits, with $500 remaining | $1,000 - $500 = $500 left |
| 2 | Plan B: risk $1,200Would exceed the daily floor | $1,000 - $1,200 = -$200 |
Plan B is $200 beyond the floor before spread, commission or slippage. Plan A fits on paper, but a fill worse than the stop narrows the remaining $500. Leaving a margin for costs is reasonable; how large is your decision.
Selectable models and day-start math
Planning models, not firm compliance verification
Fixed allowances and risk budget
total allowance = original account size x maximum drawdown % ÷ 100
trade risk = original account size x risk per trade % ÷ 100
Day-start daily floor
For a $100,000 original account, a $102,000 day-start reference and a 5% daily limit, the daily floor is $102,000 - $5,000 = $97,000. At $98,000 current equity, daily room is $1,000. The original 0.5% trade risk is still $500, and a static 10% total floor stays at $90,000. A day-start reference can also be below original account size: $98,000 - $5,000 = $93,000.
Do not overwrite original account size to force a floor match. Enter a separate positive day-start reference at the firm's reset. This model uses a fixed allowance based on original size, not a percentage of day-start balance. If your firm uses another formula, this mode does not reproduce it.
Contrast: a trailing floor (hypothetical)
Some rules trail. As one hypothetical form, imagine a fixed $5,000 drawdown measured from the highest equity reached (the watermark). The account started at $100,000, rose to $104,000, and has fallen back to $100,000.
Trailing total floor (fixed distance, uncapped)
| Step | What you compute | Arithmetic |
|---|---|---|
| 1 | Trailing floorMoved up with the peak | $104,000 - $5,000 = $99,000 |
| 2 | Static floor (5%)Never moves | $100,000 x 0.95 = $95,000 |
| 3 | Room under trailing | $100,000 - $99,000 = $1,000 |
| 4 | Room under static | $100,000 - $95,000 = $5,000 |
Same balance, same nominal $5,000 figure, and a five-fold difference in room. Entering this account into a static mode would overstate available room by $4,000. To reproduce this example, select Trailing with a 5% maximum drawdown and enter 104000 as the high-water mark. It must be at least the greater of original account size and current equity. Lowering current equity does not lower this supplied reference; update it manually when the relevant peak rises.
No trailing cap or automatic peak tracking is modeled. This is not high-water mark × (1 - drawdown %). Firms may use that percentage-based formula or stop trailing at a cap instead; confirm the rule text before relying on this estimate.
Details only your firm can answer
- When the trading day starts and ends, and in which time zone. Do not assume a reset at midnight.
- Whether floating (open) profit and loss counts toward the limit, or only closed trades.
- Whether commissions, swaps and fees are included in the loss.
- Whether touching the floor exactly is a breach, or only going below it.
- Whether the daily floor is measured from starting balance, previous close, or the higher of balance and equity.
- Whether the loss allowance is a percentage of original size or the changing reference.
- Whether the trailing watermark uses intraday equity or closed balance, and whether the floor stops rising at a trailing cap.
References are manual snapshots held only in this page's local state. There is no automatic daily reset, clock or time-zone handling, broker connection, historical breach detection or watermark tracking. Refreshing or resetting restores the static defaults. The calculator flags equity at or below a floor as STOP; a planned loss touching a floor is CAUTION. Confirm how your firm treats equality.
Using current equity for other plans
What to enter in the calculator
Account size
100000 (starting balance)
Current equity
96000
Daily loss mode
Static — original balance
Maximum drawdown mode
Static — original balance
Daily loss limit
5 (%)
Maximum drawdown
10 (%)
Expected daily floor
$95,000
Expected total floor
$90,000
Then set the risk inputs for your planned trade and compare risk against the tighter daily / total room. For the day-start example, keep original size 100000, select Day-start, enter reference 102000 and equity 98000: the daily floor becomes $97,000. For the trailing example, select Trailing, enter high-water mark 104000, maximum drawdown 5% and equity 100000: the total floor becomes $99,000. The two modes can be combined independently. Invalid selected references show CAUTION and withhold floor and room estimates rather than silently using static values.
Run your own numbers
Enter your verified specifications in the calculator and check the arithmetic.