Prop Firm Maximum Daily Drawdown Rules: How to Configure Your Trade Copier Account Protection
Prop Firm Maximum Daily Drawdown Rules: How to Configure Your Trade Copier Account Protection
A 5% Maximum Daily Loss or 5% Maximum Daily Drawdown rule sounds simple.
If you have a $100,000 prop firm challenge account, you might assume that you are allowed to lose 5% of whatever your account balance is at the beginning of each trading day.
But that is not necessarily true.
Different prop firms can advertise the same 5% daily loss limit while calculating that limit in different ways. The reference balance or equity, reset time, treatment of floating profit/loss and resulting breach level can all differ.
This is especially important when using a trade copier with account-protection settings.
Local Trade Copier EA MT4/5© provides several Receiver-side account-protection options that can help protect prop firm challenge accounts. The key is to understand exactly how your specific prop firm's Maximum Daily Loss or Drawdown rule works, and then configure the appropriate LTC protection setting accordingly.
A recent support case demonstrated exactly why this matters.
A Real FTMO Challenge Account Was Lost Because the 5% Rule Was Misunderstood
Recently, a Local Trade Copier EA MT4/5© user contacted me after his FTMO Challenge account was cancelled for violating the Maximum Daily Loss rule.
The trader believed that FTMO's 5% Maximum Daily Loss meant that he could lose 5% of his account balance each day.
That was the critical misunderstanding.
For FTMO's 2-Step Challenge, the Maximum Daily Loss amount is 5% of the Initial Simulated Capital.
The daily equity threshold is then recalculated at midnight CE(S)T using:
Previous day's account balance at midnight − 5% of Initial Simulated Capital
FTMO also considers equity when determining whether the limit has been breached, so floating profit/loss, commissions and swaps are included.
Example: $100,000 FTMO Challenge
Initial simulated capital:
$100,000
Maximum Daily Loss:
5% × $100,000 = $5,000
On the first day, the minimum permitted equity is therefore:
$100,000 − $5,000 = $95,000
Now suppose the trader makes a profit and the account balance at the next midnight is:
$104,000
The following day's minimum permitted equity becomes:
$104,000 − $5,000 = $99,000
It is not:
$104,000 − 5% of $104,000
The Maximum Daily Loss amount remains $5,000, because the 5% is calculated from the initial $100,000 simulated capital.
This was the important point that the user had misunderstood.
And recently I encountered another user with a very similar situation.
The lesson is therefore not simply to know that your prop firm has a "5% rule."
You need to know what that 5% is calculated from and how the resulting daily loss threshold is determined.
Only then can you correctly configure your account protection.
FTMO Maximum Daily Loss
For the 2-Step FTMO Challenge, FTMO currently defines Maximum Daily Loss as 5% of Initial Simulated Capital.
The daily equity limit is recalculated every midnight CE(S)T:
Previous day's account balance at midnight − 5% of Initial Simulated Capital
For a $100,000 account:
Maximum Daily Loss amount = $5,000
Day 1
Balance at the daily reference point:
$100,000
Minimum permitted equity:
$95,000
Day 2
Suppose the balance at midnight is:
$104,000
Minimum permitted equity:
$99,000
Day 3
Suppose the next midnight balance is:
$102,000
Minimum permitted equity:
$97,000
The important distinction is that the $5,000 Maximum Daily Loss amount remains fixed, because it represents 5% of the Initial Simulated Capital.
The resulting minimum equity level changes according to the balance recorded at the daily reset.
FTMO also includes floating P/L, commissions and swaps when determining the Maximum Daily Loss.
This makes positions held through the daily reset especially important. Traders should understand what happens to their permitted loss threshold when a new trading day begins.
The5ers High Stakes: Also 5%, But a Different Calculation
Now consider The5ers High Stakes program.
It also currently uses a 5% Daily Drawdown rule.
However, The5ers calculates its High Stakes daily drawdown using the higher of the previous day's closing balance or equity, measured at 00:00 server time.
For example, suppose at the daily reset an account has:
Balance: $105,000
Equity: $110,000
The higher value is $110,000.
The daily drawdown amount is:
5% × $110,000 = $5,500
The resulting equity threshold is:
$110,000 − $5,500 = $104,500
Compare this with FTMO.
Both programs may refer to a 5% daily limit, but the 5% is not necessarily calculated from the same reference value.
With FTMO 2-Step, the loss amount is based on the Initial Simulated Capital.
With The5ers High Stakes, the percentage is calculated using the higher of the previous day's closing balance or equity.
That difference matters when configuring account protection.
FundingPips 2-Step Standard: Higher of Opening Balance or Equity
FundingPips provides another variation.
Its 2-Step Standard program currently specifies a 5% Daily Loss Limit, calculated from the higher of the opening balance or opening equity for the trading day.
Floating P/L and closed positions count toward the daily loss, and the limit resets at 00:00 Platform Time.
Suppose:
Opening balance: $105,000
Opening equity: $107,000
The higher value is $107,000.
The daily loss amount is:
5% × $107,000 = $5,350
The minimum permitted equity becomes:
$107,000 − $5,350 = $101,650
If instead:
Opening balance: $100,000
Opening equity: $99,000
the higher reference value is the $100,000 balance.
The 5% daily loss amount is therefore:
$5,000
and the resulting minimum equity is:
$95,000
Once again, the headline number is 5%, but the method used to calculate it differs.
Three 5% Daily Loss Rules – Different Calculations
The examples can be summarized like this:
| Prop Firm / Program | Daily Limit | Calculation Basis |
|---|---|---|
| FTMO 2-Step | 5% | Loss amount is 5% of Initial Simulated Capital; daily equity threshold uses the balance at midnight |
| The5ers High Stakes | 5% | 5% of the higher of previous day's closing balance or equity |
| FundingPips 2-Step Standard | 5% | 5% of the higher of opening balance or opening equity for the day |
This is the central point:
The same advertised percentage does not necessarily mean the same drawdown calculation.
Before configuring any account-protection setting, check the current official rules for your exact prop firm and challenge/funded program.
How Local Trade Copier EA Can Protect a Prop Firm Challenge Account
Local Trade Copier EA MT4/5© includes several Receiver-side account-protection options.
This is useful for prop firm traders because there isn't only one way to define an account risk limit.
Depending on how your prop firm calculates its Maximum Daily Loss or Drawdown, you can choose the LTC protection setting that is most appropriate for the limit you need to protect.
The basic process should therefore be:
Understand the prop firm's rule → calculate the actual limit → choose the appropriate LTC protection setting → configure the protection inside the prop firm's breach level.
Let's look at the main options.
Maximum Daily Drawdown from Balance or Equity
The LTC setting:
Maximum Daily Drawdown from
allows you to select whether the EA's daily drawdown protection should use:
Balance
or
Equity
This is important because prop firms do not necessarily use the same reference value.
You should first establish whether your prop firm's rule is based on balance, equity, the higher of the two, or another defined value.
Then you can decide which LTC protection method is most appropriate for your particular account.
Maximum Daily Drawdown in %
The setting:
Maximum Daily Drawdown in %
allows Local Trade Copier EA to monitor a percentage-based daily drawdown limit.
The EA calculates this protection from the selected Balance or Equity value recorded at 23:59:59 of the previous day.
When the configured Maximum Daily Drawdown is reached, LTC closes the copied Receiver trades and suspends copying until the next trading day.
This can be an appropriate protection method when the prop firm's rule and your desired protection can be represented using LTC's percentage-based daily calculation.
However, this is precisely why the trader needs to understand the prop firm's formula first.
Entering:
Maximum Daily Drawdown in % = 5
simply because the prop firm advertises a "5% Maximum Daily Loss" may not be the correct configuration.
The correct LTC setting depends on how that prop firm's 5% is actually calculated.
Maximum Daily Drawdown in Money
LTC also provides:
Maximum Daily Drawdown in Money
This allows you to define the permitted daily drawdown as a specific monetary amount instead of a percentage.
This can be particularly useful when the prop firm's permitted daily loss is effectively known as a fixed monetary amount.
Consider the FTMO example above.
On a $100,000 FTMO 2-Step Challenge, 5% of the Initial Simulated Capital is:
$5,000
If you want to configure a $5,000 value in the LTC input, enter:
Maximum Daily Drawdown in Money: 5000
Do not enter 5,000 or 5.000.
Monetary Balance/Equity values in the LTC account-protection inputs must be entered as plain numbers without thousands separators.
The displayed monetary amount may therefore be written as $5,000 when explaining the calculation, while the corresponding LTC input value is entered as 5000.
The same principle applies to other monetary Balance/Equity account-protection inputs.
Understanding this distinction is important both for choosing the correct protection method and for entering the value correctly.
Receiver Account Stop Loss Equity
Another powerful LTC protection setting is:
Receiver Account Stop Loss Equity
This allows you to define an absolute Receiver account equity level.
When Emergency Account Protection is enabled and the specified equity level is reached, LTC can close the copied Receiver trades and stop copying.
This can be useful when you know the actual equity level that your prop firm account must not reach.
For example, suppose you calculate that today's prop-firm breach level is:
$95,000 equity
If, for example, you decide that LTC should intervene at $95,500 equity, the input should be entered as:
Receiver Account Stop Loss Equity: 95500
not 95,500 or 95.500.
You would normally configure LTC to intervene before the prop firm's actual breach level, leaving an appropriate safety margin.
The exact buffer is the trader's decision and should take into account factors such as:
-
spread
-
slippage
-
commissions
-
swaps
-
market volatility
-
multiple simultaneous positions
-
broker execution time
The objective is not to wait until the prop firm's exact violation point.
The objective is to have LTC intervene before it.
Max Drawdown % from Balance High
Local Trade Copier EA also provides:
Max Drawdown % from Balance High
This calculates drawdown from the highest account balance recorded since the EA was attached.
If the configured limit is reached, LTC closes the copied trades and disables further copying.
This provides another type of account protection and can be useful when the trader wants to protect accumulated account growth from a specified percentage decline.
Again, whether this is appropriate for a particular prop firm rule depends on how that firm's drawdown limit is defined.
Additional Transmitter and Receiver Drawdown Protection
LTC also includes settings such as:
No Copying if Transmitter Drawdown % >
and
No Copying if Receiver Drawdown % >
These can temporarily stop new trades from being copied when the configured drawdown level has been exceeded.
There are also settings such as:
Copy Only if Transmitter Drawdown % >
which can be used for specialized copying strategies.
These controls provide additional ways to manage when trades are allowed to reach the Receiver account.
Which LTC Protection Setting Should You Use?
There is no reason to choose an account-protection setting simply because its name resembles the terminology used by the prop firm.
Choose it according to the actual calculation you need to protect.
For example:
If the prop firm's daily limit can be represented using the previous day's Balance or Equity and a percentage:
Consider Maximum Daily Drawdown from + Maximum Daily Drawdown in %.
If the daily loss amount you need to protect is better represented as a fixed monetary amount:
Consider Maximum Daily Drawdown in Money.
If you know the absolute equity level that the Receiver must not reach:
Consider Receiver Account Stop Loss Equity, configured with an appropriate safety margin above the prop firm's breach level.
If you want additional protection against a decline from the account's highest recorded balance:
Consider Max Drawdown % from Balance High.
Remember that whenever a monetary Balance/Equity value is entered into the relevant LTC account-protection input, it should be entered without commas, periods or other thousands separators.
For example:
$5,000 → enter 5000
$10,000 → enter 10000
$95,500 → enter 95500
The important thing is to select and configure the protection according to the prop firm's actual calculation, not according to the headline percentage alone.
Never Assume That "5% Daily Drawdown" Simply Means 5%
Before configuring LTC for a prop firm account, answer these questions:
-
What is the daily loss percentage calculated from?
Initial account size, previous balance, opening balance, opening equity, the higher of balance/equity, or something else? -
What value actually triggers a breach?
Balance, equity or another calculation? -
Does floating profit/loss count?
-
Are commissions and swaps included?
-
When does the daily limit reset?
-
Which server time or time zone determines the reset?
-
Does the monetary loss allowance remain fixed or change as the account grows?
-
What happens to positions held through the daily reset?
-
How is the overall Maximum Loss/Drawdown calculated?
-
Does your exact challenge or funded-account program use different rules from the firm's other programs?
Once you know these answers, you can configure the appropriate LTC account-protection setting much more accurately.
Protect the Challenge Before the Prop Firm's Limit Is Reached
The experience of the FTMO user described at the beginning of this article provides an important lesson.
His mistake was not simply that he used account protection.
The problem was that he misunderstood the prop firm's 5% rule, and therefore his protection was based on an incorrect assumption about how much daily loss FTMO permitted.
Local Trade Copier EA MT4/5© provides several different account-protection methods precisely because different accounts and different prop firms may require different forms of protection.
The correct approach is:
1. Understand exactly how your prop firm calculates its Maximum Daily Loss or Drawdown.
2. Calculate the actual limit that applies to your account.
3. Choose the LTC account-protection setting that best matches the limit you need to protect.
4. Enter monetary Balance/Equity settings as plain numbers without thousands separators.
5. Configure LTC to intervene before the prop firm's breach level, leaving an appropriate safety margin.
And remember that prop firms can change their rules.
Always check the current official rules for your exact prop firm and program before configuring your account protection.
A percentage by itself does not tell the whole story.
Understand the rule first. Then configure the protection correctly.
Local Trade Copier EA MT4/5© English Guides
For complete instructions, please use the following English guides:
Local Trade Copier EA MT4/5© – Purchase, Installation & Quick Setup Guide
Local Trade Copier EA MT4/5© – Settings/Inputs Guide
Local Trade Copier EA MT4/5© – Troubleshooting Guide
Local Trade Copier EA MT4/5© – Copying Speed & Optimization Guide
You can also find the current web versions of the documentation here:
Purchase, Installation & Quick Setup Guide
How to Optimize MT4/MT5 Trade Copier Speed: Low Latency & Best VPS Setup Tips
Local Trade Copier EA MT4/5©
Local Trade Copier EA MT4© – MQL5 Market
Local Trade Copier EA MT5© – MQL5 Market
If you need assistance with installation, configuration or a copying problem, please contact me and I will be happy to help.
MQL5.com profile: https://www.mql5.com/en/users/eleanna74
Company email: info@juvenille-emperor.com
