Understanding Prop Firm Rules
Every prop firm has rules governing how you trade. Breaking any of them — even accidentally — can cost you your account. This guide explains every major rule type so you know exactly what to watch for.
In This Guide
Drawdown Rules
Drawdown is the maximum amount your account balance can decline before it is considered breached. It is the single most important rule in prop trading because exceeding your drawdown limit ends your evaluation or funded account immediately. There are three main drawdown types, and understanding the differences is critical to survival.
Trailing Drawdown (Real-Time)
Your drawdown floor moves up tick-by-tick as your account reaches new equity highs. If your $50K account peaks at $52K, your drawdown floor rises to $49K (assuming a $3K max drawdown). It never moves back down. This is the most aggressive drawdown type and is common at futures-focused firms like Apex and TopStep.
EOD Drawdown (End-of-Day)
Your drawdown floor only updates at the end of the trading day based on your closing balance. This means intraday spikes above your starting balance do not raise the floor, giving you more breathing room during volatile sessions. EOD drawdown is considered more beginner-friendly.
Static Drawdown
Your drawdown floor is fixed at a set dollar amount below your starting balance and never moves regardless of profit. For example, a $100K account with 10% static drawdown will always breach at $90K. This is the most forgiving type and is common in forex/CFD prop firms.
Daily Loss Limits
Most prop firms enforce a daily loss limit in addition to total drawdown. This caps the maximum loss you can take in a single trading day, typically between 2% and 5% of the account balance. Some firms calculate this based on your starting day balance, while others use the previous day closing balance.
If you hit your daily loss limit, your account is either automatically closed for the day or permanently breached depending on the firm. The daily loss limit prevents a single bad day from destroying an entire evaluation — but it also means you need strict intraday risk management.
Profit Targets
Profit targets define how much profit you need to earn to pass an evaluation phase or qualify for a payout. During evaluations, targets typically range from 6% to 10% for Phase 1 and 5% for Phase 2. Once funded, most firms do not have profit targets — you simply need to stay within drawdown limits and request payouts when ready.
Some firms let you take as long as you need to hit the target, while others impose a time limit (typically 30-60 calendar days). Firms without time limits are generally more beginner-friendly because they remove the pressure to force trades.
Consistency Rules
A consistency rule limits how much of your total profit can come from a single trading day. For example, a 30% consistency rule means no single day can account for more than 30% of your total profits. This rule exists to prevent traders from passing evaluations with one lucky trade.
Not all firms have consistency rules. Firms like Apex Trader Funding do not enforce one, while others (like some Funded Next plans) require it. If you are a trader who tends to have occasional large winning days, check whether your chosen firm has a consistency requirement.
News Trading Restrictions
Some prop firms restrict trading around high-impact economic news events (FOMC, NFP, CPI, etc.) — typically banning new positions within 2-5 minutes before and after the release. This is because extreme volatility and slippage during news events can cause outsized losses that drawdown rules are not designed to handle.
Futures-focused firms are more likely to have news restrictions than forex firms. Always check the specific rules before trading around scheduled events. PropTally's economic calendar highlights restricted periods for each firm.
Weekend Holding
Weekend holding rules determine whether you can keep positions open over the weekend. Some firms require all positions to be closed before the Friday session ends, while others allow holding through the weekend. Holding over weekends exposes your account to gap risk — the market can open significantly higher or lower on Sunday evening.
For futures traders, most firms allow weekend holding but some (especially during evaluations) do not. Forex firms are more lenient about weekend holds because the forex market has a continuous trading week with smaller gaps.
Scaling Plans
Scaling plans reward consistent traders with larger account sizes and better terms over time. After proving profitability over several months, some firms will increase your buying power, raise your drawdown limits, or improve your profit split — sometimes up to 100%.
Scaling requirements vary: some firms increase your account automatically after a certain number of profitable months, while others require you to hit specific profit milestones. Firms like Apex offer profit split increases to 100% after consistent performance.