Your daily drawdown measures the maximum loss allowed within a single trading day.
It is calculated based on your starting daily balance/equity and the lowest equity reached during that day.
In simple terms:
At the start of each trading day, a daily loss limit is set
If your floating losses plus closed losses reach that limit, the account breaches the rule
The daily drawdown then resets at the start of the next trading day
Example:
If your account starts the day at $100,000 and your max daily drawdown is 4%, your daily loss limit is $4,000.
That means your equity must not fall below $96,000 at any point during that day.
Important:
Both open trades and closed trades count toward the daily drawdown limit.