Daily drawdown is the maximum loss allowed in a single trading day. Most firms set this at 4-5% of account balance. If you exceed this limit, your challenge fails immediately regardless of overall performance. For a $100K account with 5% daily DD, you cannot lose more than $5,000 in any single day. Some firms calculate DD from start-of-day balance, others from peak equity during the day. Always verify your specific firm's calculation method.