Home / Blog

Daily drawdown, and the reset-time trap nobody warns you about

A daily loss limit is measured from a reference point set at a specific hour on the firm's own server clock, not yours. If your idea of "today" and the server's idea of "today" disagree, even by an hour, you can breach a rule you genuinely believed you had all night left to avoid.

How daily drawdown is calculated

Three approaches are all real and in use somewhere — none is universal, and which one applies to a specific rule set has to be read on that firm's own page. A hypothetical account closes a day with a balance of $100,000 and an open position, still floating, that finishes the same day at two different possible states:

The "higher of the two" method always picks whichever number is more generous to the trader — it matches equity-based when equity closed higher, and matches balance-based when equity closed lower, which is specifically designed so a floating loss open at the exact moment of the reset can't be exploited to quietly widen the next day's allowance.

Does floating P&L count?

This is the single most-asked version of the question, and the honest answer is that it depends on which of the three methods above a specific rule set actually uses — see balance vs equity for the underlying distinction. An equity-based limit includes an open position's unrealised loss the instant it happens, which means a position can breach the limit entirely on its own, without you closing anything. A balance-based limit ignores that same open position completely until it actually closes.

Whose midnight?

Three clocks that are not the same clock: the firm's own server clock (commonly CE(S)T among MetaTrader-based forex-style firms, and other clocks elsewhere — verify per firm), your own broker's server clock, and your own wall clock wherever you actually sit. See broker server time to work out how your own local time maps onto whichever server clock actually governs your account.

The DST problem

A server clock that observes daylight saving moves its own boundary by an hour, twice a year — and Europe, the US, Australia and South Africa do not all shift on the same dates as each other. South Africa is the cleanest contrast: it observes no daylight saving at all, so the gap between South African local time and a European server clock is not constant across the year, it changes exactly when Europe's clocks change and South Africa's don't. A rule you understood correctly in March can catch you in November purely because the gap moved, not because the rule itself did. See the full market-hours hub for every region's actual current offset — printing a specific date table here would only go stale, so check it live instead of trusting a fixed table on any page, including this one.

A timeline that shows the trap

A clearly hypothetical evening, invented to show the mechanism: the server resets at 00:00 CET (Central European Time, winter clock, UTC+1).

Notice London's own clock still reads the previous day when the server has already moved on — a London-based trader watching their own wall clock has no local cue at all that the count just reset underneath them.

Who this actually catches

A pure day trader who closes every position before their own local evening rarely meets this trap at all — there's nothing open when the server day rolls over, so the reset is a non-event. It is specifically the trader holding a position overnight, whether by plan or because a stop hasn't been hit yet, who needs to know exactly where the boundary sits, since that position's floating result is what the reset calculation, if it is equity-based, is quietly measuring against a brand-new day's allowance the moment the clock ticks over. The trap isn't a property of any particular strategy; it's a property of having anything open at the specific hour the server considers the day to end.

Open trades across the reset

What happens to an unrealised loss when the day rolls depends entirely on whether the limit is equity- or balance-based, the same distinction covered above. Under an equity-based limit, a position that was inside yesterday's allowance carries its current floating loss straight into today's fresh calculation — the position itself doesn't reset just because the calendar day did. Under a balance-based limit, only the closed balance resets each day, so an open position's floating loss sits outside the calculation entirely until it closes, whichever day that turns out to be.

How to find your reset hour in five minutes

1. Read the specific rule set's own current rules page for the stated reset time and reference clock.
2. Check your broker's own server time against your local clock right now.
3. Convert once, on paper, rather than trying to do the arithmetic live while a position is open.
4. Write both times down somewhere you'll actually see them before a session, not just once and forgotten.

Re-check the conversion after any daylight-saving change on either side, yours or the server's — a note written down once in March is only accurate until the next clock change moves one side of the equation and not the other. Treat it as a recurring five-minute task tied to a date, not a one-time setup step.

Check it against your own record

If you already have closed trading history, mark each day's boundary in server time on an exported statement and work out the worst intraday equity dip within each one — the same walkthrough covered in full on the FTMO-specific breach post, generalised here to any rule set rather than one firm's specific numbers.

Questions

Broker server time ·Market hours hub ·Balance vs equity ·Trading session ·Maximum drawdown ·Prop firm challenge calculator ·MT4 statement analyzer

No specific firm's reset hour, timezone or DST policy is stated as fact anywhere on this page without directing you to check that firm's own current page — rules and clocks both change. This is educational information about measuring your own trading, not financial advice. Trading carries risk of loss. Full risk disclaimer.