Max daily loss is based on 4% of the Initial account balance.
We calculate daily drawdown as follows: Upon the 5pm Est day change, we will take the higher figure of either the account balance or account equity and subtract a fixed 4% of the initial balance from the higher value as the daily loss limit for the new day.
On a 100K Account, if at 5pm EST you have an open trade with a floating profit of $2,000, your account equity will be 102K. With a 4% daily drawdown, the equity cannot drop below $98,000 ($102,000 - $4,000 = $98,000) on the next trading day.
If on a 100K Account at 5pm EST you have an open trade with a floating loss of -$2,000, your account equity will be $98,000. Because your $100K balance is higher than your $98,000 equity, your daily drawdown limit of $4,000 will be calculated on a $100K balance. This means for the next trading day, the equity cannot drop below $96,000 ($100,000 - $4000 = $96,000).
If there are no open trades at 5pm EST, the daily drawdown will be 4% of whatever the closed balance is.