Tick Value, Point Value and Your Daily Loss Limit

A funded account's daily loss limit is a dollar figure. A futures contract moves in ticks, and each tick is worth a fixed number of dollars. The distance between those two facts is where most funded futures accounts are lost, and it is nothing but arithmetic.

The four numbers

- Tick size — the smallest price increment the contract trades in. - Tick value — what one tick is worth in dollars on one contract. - Point value — tick value × ticks per point; what one full point is worth on one contract. A micro's is one-tenth of its full-size sibling's. - Stop distance — how many ticks (or points) your stop sits from your entry.

Multiply stop distance by tick value and you have the dollar risk of one contract on one trade. That is the number you compare to the daily loss limit — not the account balance, not the margin.

Work it backwards

The order most traders use — pick a contract count, then see what the stop costs — is the wrong way round on a rule-bound account. The order that keeps the account alive:

1. Start from the daily loss limit (or the tighter of daily and remaining trailing room). 2. Decide how many losing trades in a row the day should be able to absorb before the day ends — a normal losing sequence for your process, not a lucky one. 3. Divide: the limit ÷ that number is the most one trade may risk. 4. Divide again by the stop distance in ticks × tick value: that is the contract count, rounded *down*.

If the answer is less than one contract, the stop is too wide for the account, or the account is too small for the contract. Neither is fixed by trading it anyway.

Why micros exist in this arithmetic

On a full-size index contract the point value can make even a modest stop a large fraction of a small account's daily limit — one loser and the day is nearly spent. The same stop in micros is one-tenth the dollars, so the limit can absorb the ordinary run of losers. Micro contracts and prop farming is why they are the unit; this is the arithmetic that makes them so.

The room you actually have

The daily loss limit is one ceiling. The trailing drawdown is another, and it moves: distance to the floor can be less than the daily limit on a seat that has just made a run and given some back. The number to size from is whichever is smaller, on the most fragile seat in the tree — and it is re-computed every morning, because it changed overnight.

The day's stop is yours, not the firm's

Every calculation above should leave a margin below the firm's limit. The firm's rule is a breach; yours is a decision. If the firm's number is the first thing that fires, the day was sized wrong. Our own desk writes the day's stop well inside the account's limit and treats reaching it as the end of the session — a discipline, stated as such, that is most of what "risk-first" means on a funded account.

Kingdom Portfolios is an independent education company. We're not affiliated with, endorsed by, or sponsored by any prop firm, broker, or platform named here, and we don't use affiliate links. Nothing here is investment advice or a recommendation to join any firm or trade any product. Funded-account evaluations cost real money and most participants never pass or get paid — learn first, and trade your own risk. Rules and fees change often; verify current details on each company's own site. Education only.