DEFINITION
The Maximum Daily Loss is the amount the trader is allowed to lose every day. For the purpose of this rule, the higher value between equity and balance will be used.
The rule dictates that the day's equity, which includes the sum of the floating Profit and Loss (PnL) and all closed positions for that day, must not exceed the Maximum Daily Loss Limit. The Maximum Daily Loss Limit is a percentage of the initial balance. The percentage of trading rule can be adjusted depending on the package you purchase from WeMasterTrade, and the terms are always indicated at the time of purchase. Note that Swap, commission rates, and fees are included in the calculation.
Example 1: Equity is Higher than Balance at the Start of the Day
At the start of day 5, your account balance is $105,000, and your equity is $107,000. The Daily Loss Limit is 4% of the equity since it is the higher value.
Daily Loss Limit Calculation:
Daily loss = $100,000 * 4% = $4,000
This means your equity can't go below $103,000 ($107,000 - $4,000) on day 5. If your equity drops below $103,000 at any moment on day 5, your account will be closed.
Example 2: Balance is Higher than Equity at the Start of the Day
At the start of day 7, your account balance is $100,000, and your equity is $99,000. The Daily Loss Limit is 4% of the balance since it is the higher value.
Daily Loss Limit Calculation:
Daily loss = $100,000 * 4% = $4,000
This means your equity can't go below $96,000 ($100,000 - $4,000) on day 7. If your equity drops below $96,000 at any moment on day 7, your account will be closed.
WHAT HAPPENS IF I BREAK THE DAILY LOSS RULE?
The account will be automatically liquidated for the remainder of the trading day until the market is closed on the trading day if the Daily Loss was reached or surpassed for that trading day. You CAN NOT resume trading since it is a rule violation. You need to buy a new package to start again
A market order is sent to close any open positions by the auto liquidation mechanism when a Loss Limit threshold is reached. This can mean that the trader's P&L ends up over the Loss Limit threshold, which would mean that the Real Loss is more than the Daily Loss Limit, depending on where the market was fluctuating. If the trader's Net P&L does, in fact, "hit and exceed" the Daily Loss Limit, then the auto liquidation, even with the ending P&L, is unquestionably the result of that liquidation.