Trailing drawdown
High-water mark - drawdown amount
The fail floor moves up when the account reaches new highs. Once it locks at the starting balance, it typically becomes a static threshold. See the drawdown deep dive for mechanics.
Quick Reference
Prop Firm Rule Cheat Sheet
Use this as a checklist, not a substitute for the rulebook
This page compresses common prop-firm concepts into one printable reference. Rules vary by firm, so verify the written policy before paying a fee or trading a funded account.
This page compresses common prop-firm concepts into one printable reference. Rules vary by firm, so verify the written policy before paying a fee or trading a funded account.
TL;DR
- Drawdown is usually the real risk budget, not the headline account size.
- A profitable trader can still fail by violating daily loss, drawdown, hold rules, or other written restrictions.
- Legitimacy depends on transparent rules, consistent enforcement, and honored payout terms.
Core formulas
Consistency ratio
Best day profit / total profit
Often must stay below 30 percent or 40 percent, depending on the firm. One outsized winning day can push you over the limit even if total profit is strong. See the consistency rule page.
Daily loss limit
Maximum allowed loss in one trading day
Can be based on realized P&L, equity, or a running intraday threshold. Breaching the daily limit is usually a hard breach that fails the account instantly.
Buffer / reserve
Current profit cushion above the payout or drawdown threshold
This is the money that often must remain in the account before a payout is allowed. Some firms require a fixed dollar amount; others use a percentage.
Profit target
Minimum profit required to pass evaluation
Usually expressed as a fixed dollar amount or a percentage of the notional account size. The ratio of profit target to drawdown budget is the real difficulty measure of the challenge.
Profit split
Your share × (eligible profit - reserve)
After the buffer or reserve is subtracted, the remaining profit is split. Common splits range from 80/20 to 90/10 in the trader's favor. Read the fine print on what counts as "eligible." See payouts.
Risk per trade
Dollar risk / drawdown budget = % of total risk
Knowing how much of your drawdown budget a single trade consumes helps you set stop-loss distances that keep you in the game across multiple losing trades.
Payout eligibility
Profit target met + consistency pass + minimum days + buffer maintained
All conditions must be true simultaneously. Missing even one, such as not reaching the minimum trading days, blocks the payout regardless of how much profit you have generated.
Position sizing quick reference
Position sizing in a prop firm evaluation is driven by your drawdown budget, not the headline account balance. The core formula is:
Max contracts = drawdown budget / (stop distance × dollar per point)
MES at 50-point stop
$2,500 drawdown / ($1 × 50 pts) = 50 contracts
MES costs $1.00 per point ($5 per tick, 4 ticks per point). A 50-point stop risks $50 per contract. With a $2,500 drawdown budget, you could theoretically trade up to 50 MES contracts before a single loss wipes the budget, but using the full budget on one trade leaves no room for recovery.
MES at 50-point stop (conservative)
Risk 2% of budget per trade: $2,500 × 0.02 / $50 = 1 contract
Risking two percent of your drawdown budget per trade means a single MES contract at a 50-point stop. This leaves room for a string of losses without breaching the account.
ES at 50-point stop
$2,500 drawdown / ($50 × 50 pts) = 1 contract
ES costs $50.00 per point ($12.50 per tick). The same 50-point stop now risks $2,500 per contract, consuming the entire drawdown budget in a single loss. Most evaluations with $2,500 drawdown cannot safely trade ES at this stop distance.
Scaling rule
Wider stop = fewer contracts. Tighter stop = more contracts (but higher hit rate needed).
There is no free edge in position sizing. A tighter stop lets you trade more contracts but gets stopped out more often. Match your stop distance to your strategy, then size contracts to fit the drawdown budget.
Rule definitions worth checking
- Equity versus balance: does the firm count unrealized P&L when checking drawdown or daily loss?
- End-of-day versus intraday snapshots: when exactly are thresholds calculated?
- Soft versus hard breach: is the consequence reviewable, or is the account failed immediately? See the soft vs hard breach page.
- Overnight and weekend holds: what positions must be flat before session close or event windows? See news and overnight rules.
- Payout windows and caps: when can you withdraw, how much, and what reserve must stay behind? See payouts.
- Simulation versus live routing: how is the account described, and is that disclosure stable in writing? See simulated vs live.
- Consistency rule threshold: what percentage defines the cap on best-day versus total profit? Some firms enforce 30 percent, others 40 percent, and some have no consistency rule at all.
- Profit target: what is the dollar amount or percentage required to pass each evaluation phase? Verify whether it resets between phases.
- Minimum trading days: how many unique trading days are required before you can pass or request a payout? Check whether a day with zero trades counts.
- Scaling rules: does the firm limit your position size during the evaluation or early funded period and then increase it over time? Understand when and how scaling unlocks.
- Prohibited strategies and instruments: some firms ban hedging across accounts, news straddle plays, high-frequency scalping, or certain instruments during specific sessions. Violating these can retroactively invalidate passing results.
Quick reference table
Typical ranges across the industry for common account sizes. These are not firm-specific and exist only to give you a ballpark when comparing offers. Always verify the exact numbers in the firm's rulebook.
| Rule | Typical range | Notes |
|---|---|---|
| Trailing drawdown | $1,500 - $6,000 | Depends on account size; usually $2,000 - $3,000 for a 50K account |
| Daily loss limit | $500 - $2,500 | Often roughly half the total drawdown |
| Consistency threshold | 20% - 40% | Best day as a percentage of total profit; lower is stricter |
| Minimum trading days | 5 - 15 days | Per evaluation phase; some funded accounts have no minimum |
| Profit target (eval) | $1,500 - $6,000 | Varies by phase; Phase 2 targets are usually lower than Phase 1 |
| Profit split | 80/20 - 90/10 | Trader's favor; some firms offer 100% on first payout |
| Evaluation fee | $50 - $500 | Scales with account size; monthly or one-time depending on firm |
| Buffer / reserve | $100 - $500 | Must remain in account above drawdown floor to request a payout |
| Max position size | 1 - 15 contracts | Depends on account tier; scaling may unlock more over time |
Pre-session checklist
Run through these items before every trading session. Most prop firm breaches are avoidable with a consistent pre-session routine.
- Check the economic calendar.
Identify high-impact news events (FOMC, CPI, NFP, etc.) and note their exact times. Many firms require flat positions during major releases. See news and overnight rules.
- Verify your current drawdown level.
Log in to the firm's dashboard and check the exact distance between your current balance and the drawdown threshold. This number is your actual risk budget for the day.
- Check daily loss remaining.
Calculate how much you can lose today before hitting the daily loss limit. If the daily limit is tighter than your drawdown buffer, the daily limit is the binding constraint.
- Confirm overnight and news hold restrictions.
Verify whether you can hold positions through the session close, through overnight, or through upcoming news windows. Rules may differ between evaluation and funded phases.
- Check position size limits.
Confirm the maximum number of contracts allowed. If scaling rules apply, verify your current tier.
- Verify platform connectivity and data feed.
Ensure your trading platform is connected, the data feed is live, and order routing is working. Place a small test if possible. A disconnection during a position can cause uncontrolled losses.
- Review open orders from prior sessions.
Check for any resting stop, limit, or bracket orders that may have carried over. Cancel or adjust anything that no longer fits your plan.
- Set alerts at drawdown warning levels.
Configure platform alerts at 50 percent and 75 percent of your remaining drawdown buffer. This gives you an early warning before the breach threshold.
- Review your consistency ratio.
If your best day is already near the consistency threshold, plan your targets to avoid pushing it further. You may need to spread profits across more sessions.
- Confirm your trade plan for the session.
Define the setups you are looking for, the maximum number of trades, and the dollar target where you will stop for the day. Trading without a plan inside a prop firm evaluation is how most breaches happen.
Post-session review checklist
Review these items after every session to stay ahead of rule violations and track your progress toward the profit target.
- Log every trade with entry, exit, and P&L.
Record the instrument, direction, entry price, exit price, number of contracts, and net dollar result. Include commissions and fees. A trade journal makes it easier to identify patterns and fix mistakes.
- Calculate your updated drawdown buffer.
Subtract the drawdown threshold from your current equity. This is the remaining risk budget. If it has shrunk meaningfully, reduce position size in the next session.
- Check your consistency ratio.
Recalculate best-day profit divided by total profit. If the ratio is approaching the threshold, plan future sessions to distribute gains more evenly. Use the consistency ratio calculator to test scenarios.
- Verify all positions are flat.
Confirm on the firm's dashboard and your platform that no positions are open and no orders are resting. An unintended overnight hold can trigger a breach.
- Review any rule warnings or alerts.
Check the firm's dashboard for any warnings that triggered during the session, such as approaching the daily loss limit or drawdown floor. Treat warnings as near-breaches, not as acceptable operating range.
- Update your running profit total.
Compare your cumulative profit against the profit target. Estimate how many more sessions you need at your average daily P&L and whether the timeline fits within any evaluation expiration.
- Review trade execution quality.
Check for slippage on entries and exits, missed fills, and any platform issues that affected the session. If execution problems are recurring, investigate before the next session.
- Note lessons and adjustments.
Write down what worked, what did not, and one specific adjustment for the next session. Small iterative improvements compound over the course of an evaluation.
Before you pay a fee
- Save the rulebook.
Take screenshots or PDFs of the written limits, payout rules, and hold restrictions before you buy. If the firm changes rules after purchase, your saved copy is the only evidence of the original terms.
- Verify the fee stack.
Check evaluation fees, reset fees, activation fees, platform or data costs, and recurring charges. Add them all up to understand the total cost before you see any return. See fee structures for a breakdown.
- Verify the payout process.
Read the reserve, cap, KYC, tax, and documentation steps before assuming profit is withdrawable. Check payout timing, minimum amounts, and whether there are additional conditions like consistency or buffer requirements. See payouts.