A prop firm tells you that your account has a 5% Maximum Daily Loss or 5% Maximum Daily Drawdown.

That sounds straightforward.

On a $100,000 challenge account, you might assume that 5% simply means you can lose $5,000 each trading day—or that as your account grows, your daily loss allowance becomes 5% of your new account balance.

That assumption can cost you a challenge account.

Different prop firms can advertise the same 5% daily loss limit while calculating it in very different ways.

The percentage may be based on:

• the initial account size

• the previous day's closing balance

• the previous day's equity

• the higher of balance or equity

• or another reference value defined by the prop firm

The daily reset time can also differ, and floating P/L, commissions and swaps may affect whether the account has breached the limit.

This means that 5% at one prop firm does not necessarily mean the same thing as 5% at another.

For traders using Local Trade Copier EA MT4/5©, understanding this distinction is especially important because the Receiver account can be protected using different daily drawdown, monetary and equity protection settings.

The correct approach is:

Understand the prop firm's rule → calculate the actual limit → choose the appropriate LTC account protection → configure it to intervene before the breach level.

Why Understanding the Daily Drawdown Formula Matters

A recent support case illustrates the problem very clearly.

One of my Local Trade Copier EA users contacted me after losing his FTMO Challenge account because the Maximum Daily Loss rule had been violated.

The trader believed that FTMO's 5% rule meant that he could lose 5% of his account balance each day.

That was the critical misunderstanding.

For an FTMO 2-Step Challenge, the Maximum Daily Loss amount is 5% of the Initial Simulated Capital.

The daily equity limit is recalculated at midnight CE(S)T using:

Previous day's account balance at midnight − 5% of Initial Simulated Capital

So consider a $100,000 FTMO Challenge.

Initial Simulated Capital:

$100,000

Maximum Daily Loss amount:

5% × $100,000 = $5,000

On the first day:

$100,000 − $5,000 = $95,000 minimum permitted equity

Now suppose the trader makes a profit and the balance recorded at the next midnight is:

$104,000

The next day's limit becomes:

$104,000 − $5,000 = $99,000 minimum permitted equity

It is not calculated as:

$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.

That distinction was responsible for the misunderstanding in this real support case.

It is also why simply knowing that your prop firm has a "5% rule" is not enough.

You need to understand what the percentage is calculated from, what value triggers the breach and when the calculation resets.

FTMO Maximum Daily Loss Explained

For the FTMO 2-Step Challenge, the Maximum Daily Loss amount is currently 5% of Initial Simulated Capital.

The Maximum Daily Loss Limit is recalculated every midnight CE(S)T:

Account balance at midnight − 5% of Initial Simulated Capital

For a $100,000 account, the Maximum Daily Loss amount therefore remains:

$5,000

Consider three days.

Day 1

Balance at the daily reference point:

$100,000

Minimum permitted equity:

$95,000

Day 2

Balance at midnight:

$104,000

Minimum permitted equity:

$99,000

Day 3

Balance at the following midnight:

$102,000

Minimum permitted equity:

$97,000

The $5,000 loss amount remains fixed, while the resulting equity threshold changes according to the account balance recorded at midnight.

There is another important detail.

FTMO's Maximum Daily Loss is monitored using equity, not simply closed trading results. Floating profit/loss, commissions and swaps are included in the calculation.

That makes trades held over the daily reset particularly important.

A position that was comfortably inside the limit before midnight can have a different relationship to the Maximum Daily Loss Limit after the daily reset.

The5ers High Stakes Daily Drawdown

The5ers High Stakes also currently has a 5% Daily Drawdown rule.

But its calculation is different.

The5ers calculates the daily drawdown from the higher of the previous day's closing balance or equity, measured at 00:00 server time.

Suppose a $100,000 account reaches the daily reset with:

Balance:

$105,000

Equity:

$110,000

The higher value is $110,000.

The daily drawdown amount becomes:

5% × $110,000 = $5,500

The resulting equity threshold is:

$110,000 − $5,500 = $104,500

Now compare that with FTMO.

Both can have a 5% daily limit, but they are not applying that 5% to the same reference value.

For FTMO 2-Step, the Maximum Daily Loss amount is based on Initial Simulated Capital.

For The5ers High Stakes, the percentage is applied to the higher of the previous day's closing balance or equity.

FundingPips 2-Step Standard Daily Loss

FundingPips provides another example.

Its current 2-Step Standard Daily Loss Limit is 5% of the higher of the opening balance or opening equity for that trading day.

Suppose the account opens the day with:

Opening balance:

$105,000

Opening equity:

$107,000

The higher value is $107,000.

Daily Loss Limit:

5% × $107,000 = $5,350

Minimum permitted equity:

$107,000 − $5,350 = $101,650

Now suppose instead that:

Opening balance:

$100,000

Opening equity:

$99,000

The higher value is the $100,000 balance.

The daily loss amount becomes:

$5,000

and the resulting equity threshold is:

$95,000

FundingPips also states that floating P/L counts toward its daily loss calculation and that the daily limit resets at 00:00 Platform Time.

FTMO vs The5ers vs FundingPips Daily Drawdown

The three examples demonstrate why the headline percentage alone can be misleading.

Same percentage. Different calculation.

This is why you should always check the current official rules for your exact prop firm and program rather than assuming that one firm's 5% rule works like another's.

How to Protect a Prop Firm Challenge with Local Trade Copier EA MT4/5©

Local Trade Copier EA MT4/5© provides several Receiver-side account protection settings.

This is particularly useful for prop firm traders because different drawdown rules may require different types of protection.

Instead of simply entering the percentage advertised by the prop firm, first understand the rule and then choose the LTC setting that best represents the limit you want to protect.

The main options include:

Maximum Daily Drawdown from

Maximum Daily Drawdown in %

Maximum Daily Drawdown in Money

Receiver Account Stop Loss Equity

Max Drawdown % from Balance High

There are also additional Transmitter and Receiver drawdown controls that can determine when new trades are allowed to be copied.

Let's look at the main protection methods individually.

Maximum Daily Drawdown from Balance or Equity

The LTC setting:

Maximum Daily Drawdown from

allows the daily drawdown protection to be calculated from:

Balance

or

Equity

This distinction matters because different prop firms use different reference values.

Before choosing the LTC setting, determine whether your prop firm's rule is based on balance, equity, the higher of the two, the initial account size or another defined reference value.

Then select the protection method that best matches the limit you need to protect.

Maximum Daily Drawdown in %

The setting:

Maximum Daily Drawdown in %

allows LTC 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 useful when the prop firm's rule and the protection you want can be represented using LTC's percentage-based daily calculation.

However, entering:

Maximum Daily Drawdown in % = 5

simply because your prop firm advertises a 5% Maximum Daily Loss is not necessarily the correct configuration.

First, determine exactly how the prop firm's 5% is calculated.

Second, consider whether you want LTC to intervene slightly before the prop firm's absolute maximum.

For example, if the applicable maximum is 5%, a trader may decide to configure:

Maximum Daily Drawdown in % = 4.8

instead of using the full 5%.

This provides a small additional safety margin before the prop firm's maximum permitted loss is reached.

Such a buffer can provide room for factors including:

• commissions

• swaps

• spread

• slippage

• market movement

• execution time

The exact safety margin is the trader's decision and should reflect the prop firm's rules, account size and trading strategy.

The objective is not necessarily to use every last fraction of the permitted drawdown.

The objective is to have LTC protect the Receiver account before the prop firm's breach level is reached.

Maximum Daily Drawdown in Money

LTC also provides:

Maximum Daily Drawdown in Money

This defines the permitted daily drawdown as a monetary amount rather than a percentage.

This can be particularly useful when the daily loss amount you need to protect is known in money.

Consider our $100,000 FTMO example.

The Maximum Daily Loss amount is:

$5,000

Rather than configuring LTC to wait until the entire $5,000 has been lost, a trader might decide to leave a small safety margin and enter:

Maximum Daily Drawdown in Money: 4800

LTC would then intervene after a $4,800 daily drawdown instead of waiting for the full $5,000 limit.

The remaining $200 provides an additional buffer before the prop firm's maximum and can provide room for commissions, swaps, spread, slippage, market movement and execution time.

The value 4800 is only an example, not a universal recommendation. Each trader should determine an appropriate safety margin for the particular account and prop-firm rules.

Important: Enter Monetary Values Without Thousands Separators

Monetary Balance/Equity values in LTC account-protection inputs must be entered as plain numbers without thousands separators.

For example:

$4,800 → enter 4800

$5,000 → enter 5000

$10,000 → enter 10000

Do not enter 4,800, 4.800, 5,000 or 5.000.

Receiver Account Stop Loss Equity

Another useful 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 your prop firm account must not reach.

Suppose today's calculated prop-firm breach level is:

$95,000 equity

Rather than waiting until the account reaches exactly $95,000, you may decide that LTC should intervene earlier at:

$95,200 equity

The LTC input would be:

Receiver Account Stop Loss Equity: 95200

not 95,200 or 95.200.

In this example, LTC is configured to intervene $200 before the calculated breach level.

Again, $200 is simply an example. The appropriate buffer depends on the account, trading conditions and prop-firm rules.

The principle is more important than the example:

Prop firm's maximum limit = the boundary you must not cross.

LTC account protection = the earlier level at which you choose to protect the account.

Max Drawdown % from Balance High

LTC 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 form of account protection and can be useful when you want to protect accumulated account growth against a specified percentage decline.

Whether it is appropriate for a particular prop-firm rule depends on how that firm's drawdown limit is defined.

Additional Transmitter and Receiver Drawdown Controls

LTC also includes:

No Copying if Transmitter Drawdown % >

and:

No Copying if Receiver Drawdown % >

These settings can temporarily stop new trades from being copied when the configured drawdown threshold has been exceeded.

LTC also includes:

Copy Only if Transmitter Drawdown % >

which can be useful for more specialized copying strategies.

These controls provide additional ways to determine when trades are allowed to reach the Receiver account.

Which LTC Account Protection Setting Should You Use?

Do not choose a protection setting simply because its name resembles the terminology used by your prop firm.

Choose it according to the actual calculation you need to protect.

If the prop firm's daily limit can appropriately 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 want to protect is better represented as a monetary amount, consider:

Maximum Daily Drawdown in Money

If you know an absolute Receiver equity level that you do not want the account to reach, consider:

Receiver Account Stop Loss Equity

If you want additional protection against a decline from the account's highest recorded balance, consider:

Max Drawdown % from Balance High

Whichever method you use, consider configuring the protection inside the prop firm's absolute limit rather than directly on the breach boundary.

10 Questions to Ask Before Configuring Prop Firm Drawdown Protection

Before configuring LTC for a prop firm challenge or funded account, find the answers to these questions:

1. 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?

2. What actually triggers a violation?
   Balance, equity or another calculation?

3. Does floating profit/loss count?

4. Are commissions and swaps included?

5. When does the daily limit reset?

6. Which server time or time zone determines the reset?

7. Does the monetary loss allowance remain fixed or change as the account grows?

8. What happens to positions held through the daily reset?

9. How is the overall Maximum Loss or Drawdown calculated?

10. Does your exact challenge or funded program use different rules from the firm's other programs?

Once you know these answers, you can choose and configure the appropriate LTC protection much more accurately.

What Happens If MetaTrader or Your VPS Is Offline at the Daily Reset?

There is another practical issue worth considering when using any automated daily drawdown protection.

The daily reference point matters.

If MetaTrader, the computer or the VPS is offline at the relevant daily reset time, the EA cannot observe the account at that moment in the same way it can while the terminal is continuously running.

This is another reason to avoid treating the prop firm's absolute maximum as your preferred protection setting.

Leaving a small safety margin can provide additional room for differences around daily reference values, trading costs and execution conditions.

For a prop firm challenge account, maintaining a stable MetaTrader/VPS environment and understanding both the prop firm's reset time and your protection system's daily reference method are therefore important.

Protect the Challenge Before the Maximum Daily Loss Is Reached

The real FTMO support case that prompted this article demonstrates an important lesson.

The trader knew that FTMO had a 5% Maximum Daily Loss rule.

What he misunderstood was what that 5% was calculated from.

As a result, the protection was based on the wrong assumption about the amount of daily loss available to the account.

Local Trade Copier EA MT4/5© provides several different Receiver account-protection methods because different accounts and different prop-firm rules can require different forms of protection.

A better process is:

1. Understand exactly how your prop firm calculates 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 values correctly without thousands separators.

5. Consider setting LTC to intervene slightly before the prop firm's breach level.

6. Recheck the official prop-firm rules whenever the firm changes its programs or trading conditions.

A percentage by itself does not tell the whole story.

Understand the rule first. Then configure the protection correctly.

Learn More About Local Trade Copier EA MT4/5©

If you need to copy and manage trades between multiple MetaTrader 4 and MetaTrader 5 accounts, you can explore the complete Local Trade Copier EA MT4/5© documentation and test the software before purchasing.

Need Help With Your Setup?

If you have questions about installation, configuration, copying between MT4 and MT5, or managing multiple receiver accounts, check our guides or contact us directly.