A stop-loss is a risk-control order designed to close a position automatically when price reaches a defined level, capping the loss on that trade at a predetermined amount before the loss can grow further.
In funded evaluations, a stop-loss serves two distinct functions: it protects the individual trade, and — when combined with correct position sizing — it ensures a single losing trade cannot consume a disproportionate share of the daily loss limit or maximum drawdown.
How stop-losses interact with evaluation limits
The daily loss limit and maximum drawdown are hard limits enforced on equity, not on individual trade results. This means a stop-loss placed beyond the daily limit does not prevent a breach — it just determines the size of the breach. The stop must be placed close enough that if it is hit, the resulting equity drawdown stays within the limit.
Example: A $10,000 account with a $500 daily loss limit. A single trade with a 60-pip stop on a 1.0 lot EURUSD position risks approximately $600 — more than the daily limit. The stop is set, but the evaluation can still be ended on that one trade.
Stop placement and slippage
Stops are not guaranteed fills at the specified price. During high-volatility events — news releases, rollover, gap opens — price can move through a stop level and fill at the next available price, a phenomenon called slippage. The actual loss on a stop-out is the stop distance plus spread plus any slippage.
This matters in evaluations because a trade can be sized to respect the daily limit at the stop price, yet breach it due to slippage on a fast-moving market. Risk calculations should include a slippage buffer on volatile instruments or around scheduled news events.
Stop-loss requirements in evaluation programs
Most programs do not mandate a stop-loss on every trade — the hard limits act as the ultimate enforcement mechanism. However, trading without a stop-loss means the evaluation’s risk limits are the only backstop, leaving no margin for error on a fast market. Some programs impose stop-loss requirements as an explicit rule; always check the rulebook.
For the limits a stop-loss must work within, see daily loss limit, trailing drawdown, static drawdown, and position sizing.
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