What is a daily loss limit, and is hitting it a soft or a hard breach?

A daily loss limit is a cap on how much an account may lose inside a single trading session, usually measured from the balance that session started with. Reaching it stops trading for the day at the least, and on some programs it fails the account outright. At Phoenix Trader Funding the Classic, Daily and Spark evaluations carry no daily loss limit at all, the Merit assessment carries a 25 percent dynamic one, and on a Live account the limit is a scalable one set with the trader.

What a daily loss limit measures

A daily drawdown is the same rule under another name: the most an account may lose between the start and the end of one session. Traders use the two terms interchangeably, and so do rule tables.

The limit is easy to confuse with the trailing drawdown, and the two do different jobs. A trailing drawdown is a loss floor under the whole account that rises as the balance rises and carries over from one session to the next. A daily loss limit starts again every session. One protects the account over its whole life; the other stops a single bad day from doing all the damage at once.

On an account that carries both, both are live at the same time, and whichever sits closer to the balance is the one that binds. A daily limit that is wider than the room left above the trailing floor never gets the chance to trigger, because the floor is reached first.

What the limit watches matters as much as its size. A limit measured on equity counts an open position's loss the moment it appears, not only when the trade is closed. Equity is the account balance plus or minus the profit or loss on positions still open. On a limit of that kind, a trade that goes against you and later recovers can still end the session on the way down.

Soft breach and hard breach

The question traders ask most about a daily limit is what happens when they hit it, and the answer comes down to two kinds of breach.

A hard breach is a rule break that fails the account: an evaluation will not be funded, or a funded account is closed. A soft breach is a rule break that stops trading without ending the account: open positions are closed, the account sits flat for the rest of the session, and it trades again when the next session opens.

The difference changes how you trade the morning after a loss. Under a soft limit, a bad session costs you that session. Under a hard limit, the same session can cost you the account, so the sensible personal stop sits well inside the program's line rather than on it.

Neither kind is the same thing as a rule violation, such as holding a position overnight. A violation is about what you traded, not how much you lost, and it can end an account that is in profit. The full range of things that end an account, and what follows each one, is covered in our answer on what a breached account is.

Daily loss limits on the main Phoenix accounts

No daily drawdown applies to a Classic, Daily or Spark evaluation at Phoenix Trader Funding. A single bad session cannot fail any of these evaluations by itself. The line that can is the trailing drawdown, which on every evaluation is recalculated at the end of the day and stops rising once it reaches the starting balance.

Classic keeps that freedom once funded: a funded Classic account has no daily drawdown either.

A funded Spark account changes something else. Its trailing drawdown moves in real time through the session instead of waiting for the close, so a loss inside the day presses against the floor as it happens. That is not a daily limit, but it is the closest thing to one a Spark trader meets, and it is explained in our answer on how an intraday trailing drawdown works.

Merit is built differently. The Merit assessment runs for at most 30 calendar days with no profit goal and no trailing floor. It carries a static total loss limit and a dynamic daily drawdown of 25 percent. Every trade on the account is reviewed by the risk team and by an AI, and a person then decides whether to fund it, with maximum drawdown and the time taken to recover from it among the published criteria. The terms are set out on the Merit accounts page.

Live accounts

A Live account is a funded account that trades at a broker rather than in simulation, and it is the last stage of the path. On a Live account at Phoenix Trader Funding, the daily drawdown is a scalable limit set with the trader rather than a fixed line from a rule table.

The rest of the Live account loosens too. Its overall drawdown is static and stops adjusting at the starting balance, and every restriction that applies in simulation is waived except holding a position overnight or over the weekend.

A Merit trader who is accepted goes straight to a Live account, and that account carries no daily drawdown, no buffer, no withdrawal limits and no consistency rule.

Phoenix Labs accounts: a pause, not a failure

Phoenix Labs is the experiment division of Phoenix, where funded account concepts are sold as real, tradable accounts. Some Labs accounts carry a daily loss limit and others carry none, and each one states its own rule with the rest of its terms.

Where a Labs account has a daily loss limit, it is a soft breach by design. Reaching it closes every open position and pauses trading until the session ends at 5:00 PM ET, and the account carries on the next session. It is a protection, not a failure. A Labs funded account keeps the same daily loss limit its evaluation had, if the evaluation had one, so the rule does not tighten on the day you pass.

A pause is not free, though. The positions it closes are closed at the market at that moment, so the loss that triggered the pause is realised rather than given time to recover.

Trading inside a daily limit

• Decide your own stop for the day before the session opens, and put it inside the program's limit rather than on it.
• Treat open losses as already counted. On a limit that watches equity, a position does not have to be closed to use up the day's room.
• Place a stop with every entry. A stop that sits in the market protects the day even when you are not watching the screen.
• Know which line binds first. On an account with both a daily limit and a trailing drawdown, the closer of the two is the one you are really trading against.

The published rule tables for each account type, the drawdown figures included, sit on the Phoenix evaluations page.

Common follow-up questions

Is a daily loss limit the same thing as a CME daily price limit?

No. A daily loss limit caps what one account may lose in a session, while a CME daily price limit caps how far a futures contract's price may move in a session. Phoenix guidance is to stop trading within 2 percent of the CME daily price limits.

Can I keep trading a Classic evaluation after a heavy loss early in the session?

Yes. No daily loss limit stops trading on a Classic evaluation, so the session goes on after a loss. The line that still applies is the trailing drawdown, and it is the one to keep in view for the rest of the day.

Does a paused Labs account count as a failed account?

No. Reaching the daily loss limit on a Phoenix Labs account closes the open positions and pauses trading until the session ends, and the account trades again the next session. The loss that caused the pause is realised, though.

Do open losses count toward a daily loss limit?

On a limit measured on equity they do, the moment they appear. Equity includes the profit or loss on positions still open, so a trade does not have to be closed before its loss uses up the day's room.

Is there a daily loss limit on a Merit Live account?

No. An accepted Merit trader moves straight to a Live account that carries no daily drawdown, no buffer, no withdrawal limits and no consistency rule. The 25 percent dynamic daily drawdown belongs to the 30 day assessment.