Prop firm evaluations let you trade a larger account by passing a test with strict rules. Most traders who fail don't fail because their strategy loses; they fail because they break a rule they didn't fully understand. This chapter covers the common rules and how to trade within them.
| Rule | What it means | Common trap |
|---|---|---|
| Profit target | Reach a set gain, often 6–10%, to pass a phase | Oversizing to hit it quickly |
| Daily loss limit | Maximum loss in one day, often 3–5% | Forgetting that open losses usually count |
| Maximum drawdown | Maximum total loss from a reference level | Not knowing whether it's static or trailing |
| Minimum trading days | Trade on a set number of days | Forcing low-quality trades to tick a box |
| Consistency rule | No single day may be more than a set share of total profit | One huge day that has to be 'diluted' |
| News and weekend rules | Restrictions around events and holding over weekends | Not checking the calendar |
Static vs trailing drawdown
A static drawdown is measured from the starting balance: on a $100,000 account with a 6% limit, you fail below $94,000, however much you've made. A trailing drawdown follows your highest balance (on some firms, your highest intraday equity), often until it reaches the starting balance. Profits raise the floor, so gains give you less breathing room than you might think.
Worked example: sizing from the daily limit
A $100,000 evaluation has a 5% daily loss limit ($5,000) and a 10% maximum drawdown.
If you want to survive five full losses in one day with room to spare, risk no more than about 0.75% per trade ($750): five losses cost $3,750, leaving $1,250 of buffer for slippage and open losses.
Trading within the rules
- Size from the limits, not just from your account size. Know your remaining daily and total allowance before every trade.
- Set a personal daily stop well inside the firm's limit, for example half of it.
- Treat the target as a by-product. Evaluations usually have generous time limits, or none; there's no need to rush.
- Read the exact definitions: does the daily limit reset at 17:00 New York time? Is drawdown measured on balance or equity?
Key takeaways
- Prop evaluations combine a profit target with a daily loss limit, a maximum drawdown and other rules.
- Static drawdown is fixed from the start; trailing drawdown follows your highest balance or equity.
- Size each trade from the remaining daily and total allowance, and set a personal daily stop inside the firm's.
- Read the exact definitions and confirm current rules on the firm's own site.