Prop firms — the funded-account kind — let you trade the firm's capital after you pass an evaluation, keeping a share of the profits. The appeal is trading real size without risking a big account of your own. The catch is a set of rules that fails far more people than bad trading does. Here's what each one means.
The profit target
To pass an evaluation you usually have to reach a profit target — a set percentage gain — while staying inside every other rule. It's the "prove you can trade" bar. The trap is chasing it too aggressively and breaking a risk rule in the process.
The maximum drawdown — usually the account-killer
The maximum drawdown is the most you can lose before the account is done, and it's most often trailing: it rises as your balance hits new highs but doesn't drop back when you give profits back. That means it can creep up to sit just beneath your account and stop you out on an ordinary pullback — even while you're still up on the challenge overall. This one rule ends more attempts than anything else, which is why it's worth understanding cold. Read the deep dive in trailing drawdown, explained, and track your real stop-out level in the trailing drawdown calculator.
The daily loss limit
Separate from the overall drawdown, a daily loss limit caps how much you can lose in one day. Hit it and you're done for the session, even if your total drawdown is fine. Its job is to stop tilt — the revenge-trading spiral after a bad morning that turns a small loss into a blown account.
The consistency rule
Many firms add a consistency rule: no single day (or trade) can be more than a set share of your total profit — commonly 20–50%. It stops people from passing on one lucky gamble and forces steadier results. Percentages vary by firm, so check the exact number.
Minimum trading days and prohibited strategies
- Minimum trading days: you often must trade a set number of days, so you can't pass in a single session.
- Prohibited strategies: many firms ban or limit holding through major news, certain high-frequency tactics, or copy trading. Read the fine print.
- Payout split & scaling: once funded, you keep a share of profits (often 80–90%), and some firms scale your size as you stay profitable.
How to actually pass
The winning approach is boring on purpose: risk a small, fixed amount per trade with the position size calculator, respect the daily limit so one bad day can't end you, and keep your biggest day well under the consistency cap. The rules reward survival, not heroics — trade like the drawdown is right beneath you, because it usually is.
This is educational information, not financial advice. Every firm's rules differ — always read the specific program terms.