A daily loss limit is a predetermined maximum amount a trader (or a firm's rules) allows to be lost in a single trading day, after which all trading stops until the next session. It's a discipline tool designed to prevent a bad day from spiraling into a much worse one through revenge trading or overtrading.
Prop trading firms commonly enforce a hard daily loss limit as a rule of the funded account, automatically disabling trading (or breaching the account) if it's crossed.
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