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Hard breach and soft breach

Hard Breach / Soft Breach

Risk management

Definition

A Hard Breach closes the account permanently, usually by hitting the overall drawdown threshold. A Soft Breach is a violation of a trading rule that doesn't burn the account: trading is stopped for the rest of the day, the trade is closed, or its profit is erased.

Detailed explanation

The same rule can be strict in one firm and lenient in another, and sometimes even between plans of the same firm. The classic example is the daily loss limit: in some firms, it only locks trading until tomorrow, and in others, it disqualifies the account. When reading a firm's page, it's worth marking each rule as strict or lenient. Strict rules determine position size, while lenient ones mainly determine habits.

An example from the prop world

In FTMO Futures, on a 50K Sim-Funded Growth plan account, a daily loss of $1,000 closes positions and stops trading until the end of the day, and the account continues tomorrow. In the Pro plan, the same rigid limit applies, and hitting it terminates the account.

How it works at the firms on this site

Based on the rules listed on our firm pages. Rules get updated, so check the firm's page before buying.

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Daily loss limit

A loss cap for a single trading day. At most firms crossing the DLL stops trading until the end of the day, and at some it counts as a violation that closes the account.

Maximum loss limit

The maximum amount an account may fall below its reference point before it's disqualified. At prop firms it's also called the MLL (Maximum Loss Limit), and each firm calculates it differently: intraday trailing, end-of-day trailing or static.

Reset

An account reset is a manual action meant to return the trading account to its original starting state by restoring the balance and restarting progress.

High-Impact News

Timed economic releases that sharply move the market within seconds: Fed interest rate decisions (FOMC), Consumer Price Index (CPI), and the Employment Report (NFP). In economic calendars, they are marked in red, hence the nickname Red Folder. Some prop firms prohibit being in a position around them.

End-of-day (EOD) trailing drawdown

End-of-day drawdown (EOD Drawdown) is a trailing maximum loss limit rule in which the loss threshold moves up only once a day, based on the closing balance. At most firms, however, the threshold itself is enforced in real time, so touching it during the trading day fails the account.

Intraday trailing drawdown

This is a risk management limit calculated continuously in real time throughout the trading day. It tracks the account's peak balance (including realized profits and unrealized profits from open positions), so the loss threshold always rises together with the peak balance while keeping a fixed distance, but never goes down; crossing this threshold at any moment (even for a single second) causes immediate failure or closure of the account.