How It Works
The Daily Loss Limit (DLL) is a technical loss limit, which is to say that all it does is halt trading for the remainder of the day. When the DLL threshold is hit, the system automatically liquidates any open positions at the current market price and prevents any new trades from being taken that day.
Hitting the DLL in a Purdia Capital account does not count as a rule break, nor does it fail an evaluation. Traders are free to come back the next day and resume trading, provided that they have not hit their maximum drawdown. There is no limit to how many times a trader can hit the DLL, as long as they stay above the maximum drawdown.
It is important to note that by default, not all evaluations being with a Daily Loss Limit in place. You can see whether your account has a DLL, and what the threshold is, from your Purdia Dashboard. If you do not already have a DLL and would like one put in place for protection, or if you would like to alter your existing DLL, please email info@purdia.com and specify the account number and desired level.
All traders in Live Funded Accounts have a DLL in place, the level of which is chosen cooperatively between the trader and their risk manager during the Live Funded Account onboarding call. If we see that one of our traders is struggling with the Daily Loss Limit, we will schedule a one-on-one call with an internal risk manager to discuss the trader’s performance. The purpose of these risk manager consultations is to assess whether the current risk parameters are appropriate for the trader, and whether the trader’s style fits with their current account size.
Why We Do It This Way
Most other online funding firms take one of two approaches to the Daily Loss Limit, both of which we believe are deeply flawed.
Some firms have a DLL that is both too large and too consequential, allowing too big of a losing day and then compounding the problem by treating it as a rule break. This approach has multiple negative consequences to traders and their psyches. Allowing such large losing days and then forcing the trader to pay for a reset in order to continue is a recipe for disaster. The large DLL encourages greater risk taking and gambling behavior, and the penalty of an account loss after the limit is hit only further reinforces the feeling of failure, at a time when what the trader needs is simply a temporary pause and mental reset.
Some other firms don’t have a Daily Loss Limit at all, and simply let their traders trade without any kind of safety net. This approach is arguably worse than the other, because it further exacerbates the gambling mentality and the bad over-leveraging habits that many traders struggle with.
Every trader, no matter how successful, encounters a bad day from time to time. For traders that haven’t yet proven to be consistently profitable, those bad days may come more often than we’d like. At Purdia Capital, we believe that one of the best ways to successfully grow as a trader and maintain success over time is to limit the impact of the bad days.
