Prop firm rules explained

Before you start any prop firm challenge, you need to understand exactly what rules you're agreeing to. Breaking a single rule — even accidentally — can end your challenge instantly. This guide explains every common rule in detail.

Drawdown rules (the most important)

Drawdown rules are where most traders fail. Understanding the differences between drawdown types is crucial.

Daily drawdown (daily loss limit)

How it's calculated: Firms differ. Many measure the daily limit from the day's starting balance (or the higher of starting balance and starting equity). Some measure it from your highest balance or equity during the day, which is stricter: if you're up $2,000 at midday, the limit is then measured from that high point. Check your firm's exact definition.

Example: $100K account with a 5% daily limit. You start the day, make $3,000, then lose $8,000. Measured from the intraday high, that is a $5,000 drop — the full 5%, so you've hit the limit. Measured from the starting balance, you are down $5,000 there too, so either way the limit is reached.

Maximum drawdown (total loss limit)

Types of maximum drawdown

Profit targets

The minimum profit you need to pass each phase of the evaluation.

Common profit targets

• Phase 1: 8-10% (most common)
• Phase 2: 5% (most common)
• 1-Step Challenges: 8-10% (single phase)
• Instant Funding: No evaluation profit target (funded account rules still apply)

Trading day requirements

Minimum trading days

Many firms require you to trade a minimum number of days (typically 3-10) before passing. A "trading day" usually means placing at least one trade that day.

No time limit vs. time limits

• No time limit: Take as long as you need to pass (common: 135 of the 192 firms in our data offer it on at least one programme)
• 30-day limit: Must complete the challenge within 30 calendar days
• Unlimited time + inactivity clause: No deadline, but the account can be closed after a set period with no trading (often around 30 days)

Consistency rules

Some firms require your profits to be distributed somewhat evenly across trading days.

Common consistency rules

• No single day > 30-40% of total profit: Prevents "lucky" one-day passes
• Minimum profitable days: Some percentage of days must be green
• Lot size consistency: Can't suddenly trade 10x your normal size

Trading restrictions

News trading

Many firms restrict trading around high-impact news events:

• No restriction: Trade anytime (most trader-friendly)
• 2-minute restriction: No new trades 2 min before/after news
• 5-15 minute restriction: Common conservative restriction
• Must close positions before news: Most restrictive

Weekend holding

• Allowed: Keep positions open over the weekend
• Prohibited: All positions must be closed by Friday market close

Overnight holding

• Allowed: Hold positions overnight
• Prohibited: Must close all positions by end of trading session

Lot size & position limits

Maximum lot size

Most firms limit the maximum position size you can take. Common limits:

• Limits are usually set per account size (for example, a fixed number of lots on a $100K account)
• Some firms use margin or leverage limits instead of a lot cap
• Some firms: No explicit limit (use common sense)

Maximum open positions

Some firms limit how many trades you can have open simultaneously (e.g., max 3-5 positions).

Prohibited trading strategies

Almost always prohibited

• Copying other people's trades or sharing accounts: Trading signals or copy services from third parties, or trading identically with other traders
• Hedging across accounts: Going long on one account and short on another
• Account management services: Having someone else trade your account
• Arbitrage/latency exploitation: Exploiting price feed delays

Sometimes prohibited

• Martingale: Some firms ban doubling down on losers
• Grid trading: Some firms ban systematic grid strategies
• High-frequency trading: Excessive trades per minute may be flagged

Usually allowed

• Expert Advisors (EAs): Most firms allow them (verify first)
• Scalping: Most firms allow, but check minimum hold times
• Hedging within same account: Often allowed, but some firms ban it — check the rules

Payout rules (funded stage)

Profit split

The percentage of profits you keep vs. what the firm takes:

• 100%: Offered as the top split by about a quarter of the firms in our data (36 of 145 that state one), often only at higher tiers or on certain products
• 90%: The most common top split in our data (59 of 145)
• 80%: Also common (34 of 145), often as a starting split that can rise
• Below 80%: Uncommon (3 of 145)

Payout frequency

• Bi-weekly: Every 2 weeks
• Monthly: Once per month
• On-demand: Request withdrawal anytime

First payout timing

Many firms require you to wait before your first withdrawal:

• No waiting period: Request anytime after profit
• 14-day wait: Common first payout delay
• 30-day wait: More conservative firms

Scaling plans

How firms increase your account size based on performance:

Common scaling structures

• For example: reach a set profit over a set number of months and the account size increases by a set percentage
• Repeat cycle to grow account over time
• Some firms advertise scaling up to $2M

Quick reference: rule comparison