Daily loss limit and drawdown rules for prop-firm accounts

Why two limits

Hookmode has two limits. They count different things and they stop different things.

The drawdown limit is per rule. It watches one portfolio rule: how far that rule's realized P&L has fallen below its own best point.

The daily loss limit is per trading account. It watches one account: what that account has lost today, across every rule that trades on it.

You want both because several rules can trade the same account. Each rule can sit well inside its own drawdown limit while the account has already lost more than you want to lose in a day. Both checks run on the server, before a trade leaves for your PC, and either one can stop the trade on its own.

A third control does not count losses. The max risk per trade looks at one new trade and limits what it may lose at its stop loss. It has its own section below.

The daily loss limit

You set one limit per trading account, in the currency of that account. Hookmode checks it every time a signal asks to open a trade there.

This is what the limit counts:

The count is net, so a profitable close today gives room back. No running counter is stored and no job resets it: the number is computed from your trades each time a signal arrives.

Every trade Hookmode sends carries a stop loss, so its worst case is known the moment it is placed. An open trade holds that amount against the limit until it closes, and the close then replaces it with the real result. The trade the signal is asking for is counted the same way, before it is sent. Otherwise a single large trade could always step over the limit.

That is why the limit can be reached with nothing closed at a loss yet. The example below reaches it while a trade is still open.

In the example the limit is $1,000. A 0.50 lot EURUSD trade reserves $300 and then closes at its stop for −$300. A 0.20 lot XAUUSD trade reserves $700 and is still open. Used is $1,000, the limit is reached, and the next signal on that account is refused.

The day resets at midnight in your broker's server time. Hookmode reads the server clock from your terminal, so there is nothing to pick, and a broker that switches daylight-saving time on its own calendar is followed.

Some firms reset at a different moment from their server midnight, 17:00 New York time for example. Hookmode still counts the day from server midnight, so set the Hookmode limit with that gap in mind.

When the limit is reached, no new trade opens on that account. Three things follow:

• The signal is still received and traced. The refusal is in the trace, with the reason “the account reached its daily loss limit”.
• A Telegram alert goes out: “Trading account … reached its daily loss limit”, with the account name filled in.
• Trades that are already open are left alone. Their stop loss and take profit stay at the broker, and close signals still pass.

The block is released at the next day reset. Turning the limit off releases it too.

What the limit does not see:

• Trades you place by hand in the terminal. Only trades placed through Hookmode are counted.
• A close worse than its stop loss. A gap or slippage takes more than the trade reserved; the number corrects itself when the close lands, so the loss is counted late.
• Your prop firm's own measure. Firms read floating equity and run their own clock, so their number moves when this one does not. Set the Hookmode limit below the firm's.

The drawdown limit per rule

The rule's drawdown limit belongs to a portfolio rule: one strategy trading one account. It measures how far the rule's realized P&L sits below the best point it has reached. Not the account balance, and not the open trades: only what this rule has closed.

The rule's drawdown limit comes from two numbers you already set:

The strategy carries the drawdown limit, the rule carries its risk factor. A rule trading the same strategy at half size gets half the drawdown limit. This is useful when one signal fans out to a challenge account and a funded one.

You can also type the rule's drawdown limit itself. On the rule, choose Drawdown limit instead of Risk factor and enter the amount, as money or as a percent of the account balance. Hookmode computes the risk factor from it and keeps your amount when the strategy changes. A percent follows the balance your terminal reports, so the limit moves with the account.

Hard stop is a switch on the rule. With it on, a breach stops new trades on that rule and latches: the block holds until you reset the drawdown by hand, even if later closes bring the number back under the limit. With it off, the drawdown is still measured and shown in the app, but nothing is blocked.

A blocked rule refuses new trades and says so in the trace, and a Telegram alert goes out: “A rule reached its drawdown limit on trading account …”, with the account name filled in. Close signals still pass, so a position the rule already opened closes the normal way. Resetting the drawdown starts the measurement again from that moment: closes before the reset stop counting.

In the example the rule's drawdown limit is $500 and the hard stop is on. Four closes take the drawdown to $500, the rule is blocked, and the next signal is refused.

The max risk per trade

The max risk per trade belongs to a trading account. It does not count losses. It looks at one new trade and asks what that trade would lose if it closed at its stop loss.

You set the maximum as money or as a percent of the account balance. A percent follows the balance your terminal reports. Every rule that trades the account is checked against it, whatever its own risk setting is.

You also choose what happens to a trade above the maximum:

• Reject the trade. The trade is not sent. The refusal is in the trace, with the reason “the trade risks more than the account's max risk per trade”, and a Telegram alert goes out.
• Reduce the volume to fit. Hookmode lowers the volume to the largest one that stays at or under the maximum, rounded down to the broker's lot step, and sends that trade. The trace shows the volume the rule asked for and the volume that was sent.

If even the broker's minimum volume would risk more than the maximum, the trade is rejected. The check runs before the daily loss limit looks at the trade, so a reduced trade reserves its reduced risk.

The maximum is measured at the stop loss. A gap or slippage can close a trade beyond its stop loss, so the real loss can be larger.

Setting them up

The daily loss limit, per account:

• Open the account in the web app and find the Daily loss limit panel.
• Press Set limit.
• Turn on “Use a daily loss limit”.
• Enter the amount.

The drawdown limit, per rule:

• Open the strategy and set the drawdown limit.
• Open the portfolio rule that links the strategy to the account and set its risk: a risk factor, or a drawdown limit of its own.
• Turn on “Stop opening trades at the drawdown limit” so a breach stops new trades.

The max risk per trade, per account:

• Open the account in the web app and find the Max risk per trade panel.
• Press Set max risk.
• Turn on “Use a max risk per trade”.
• Enter the amount, as money or as a percent of the balance.
• Choose what happens to a trade above it: reject the trade, or reduce the volume to fit.