This article was written with AI assistance and reviewed by our editorial team. It is for informational purposes only and does not constitute financial advice.
Every prop firm has rules. Break them, and you lose your account — regardless of how profitable you are. Understanding these rules inside and out is essential before starting any evaluation. This guide breaks down every common rule you'll encounter across prop firms.
Daily Loss Limit
The daily loss limit (DLL) is the maximum amount you can lose in a single trading day. Most firms set this at 5% of the initial account balance.
How it works:
- For a $100K account with a 5% DLL, you cannot lose more than $5,000 in one day
- The calculation typically resets at midnight server time (varies by firm)
- Both realized losses (closed trades) and unrealized losses (open positions) count toward this limit
Important nuances:
- Some firms calculate DLL from the start-of-day balance, not the initial balance. This can work in your favor if you've been profitable.
- FTMO uses a "balance-based" DLL that resets based on your end-of-day balance
- TickTickTrader removes the daily loss limit entirely for futures traders
Pro tip: Set your personal daily loss limit at 2-3% to give yourself a cushion.
Maximum Drawdown (Total Loss Limit)
The maximum drawdown is the total amount you can lose from your starting balance (or highest balance, depending on the firm). This is typically set at 8-10%.
Static Drawdown
Your loss limit is calculated from the initial starting balance and never changes.
Example: $100K account, 10% max drawdown = limit at $90K. Even if your balance reaches $115K, the limit stays at $90K.
Firms using static drawdown: FundedTradingPlus, FXIFY, FundedNext (Stellar)
Trailing Drawdown
Your loss limit "trails" upward as your account grows, locking in a portion of your profits.
Example: $100K account, trailing 10% drawdown. Balance hits $105K, drawdown limit moves to $95K. Balance hits $110K, limit moves to $100K.
Firms using trailing drawdown: FTMO (on funded accounts), many futures prop firms
End-of-Day (EOD) Trailing
A softer version of trailing drawdown where the limit only updates at the end of each trading day, not intraday.
Example: You start the day at $105K. Intraday your balance hits $112K but closes at $108K. The trailing limit updates based on $108K (the closing balance), not $112K.
Firms using EOD trailing: Bulenox, some configurations at other futures firms
Minimum Trading Days
Many firms require you to trade for a minimum number of days during the evaluation. This is to prevent traders from passing with a single lucky trade.
A "trading day" typically means a day where at least one position was opened or closed.
Time Limits
| Firm | Phase 1 | Phase 2 |
|---|
| FTMO | 30 days | 60 days |
| FundedNext (Stellar) | 30 days | 60 days |
| FundedTradingPlus | No limit | No limit |
| Goat Funded Trader | No limit | No limit |
| Alpha Capital Group | No limit | No limit |
News Trading Restrictions
High-impact news events (NFP, FOMC, CPI) create extreme volatility. Many prop firms restrict trading during these events.
Common restrictions:
- No opening new positions within 2-5 minutes before and after high-impact news
- Some firms apply this only to directly affected instruments
- Some firms apply it to ALL instruments
Firms that allow news trading: FundedTradingPlus, Goat Funded Trader, some configurations at FXIFY
Always check the specific firm's news trading policy before you start. Getting caught off-guard by a news restriction is one of the most common reasons for failing a challenge.
Weekend Holding
Some firms don't allow you to hold positions over the weekend (market close Friday to market open Sunday).
- Allowed by default: FundedTradingPlus, The5ers
- Restricted by default: FTMO (opt-in available), FundedNext
- Varies: Many firms offer this as an add-on option
If you're a swing trader, make sure weekend holding is permitted before you start.
Lot Size and Leverage
Most forex prop firms offer leverage between 1:30 and 1:100. The maximum lot size is usually not explicitly limited, but practical limits come from margin requirements.
For futures firms:
- Account sizes determine the number of contracts you can trade
- Micro and mini contracts are available at most firms
- Scaling rules may apply (gradually increasing your contract limit)
Consistency Rules
Some firms require your profits to be relatively consistent — no single trade should account for more than 30-50% of your total profit.
This prevents traders from gambling on a single large position to pass the challenge. If you trade with proper risk management (1% per trade), this rule is almost impossible to trigger.
Copy Trading and EAs
| Rule | Common Policy |
|---|
| Expert Advisors (EAs) | Allowed at most firms |
| Copy trading from other accounts | Usually prohibited |
| Signal services | Allowed if manual execution |
| HFT / Latency arbitrage | Prohibited at all firms |
| Martingale / Grid | Allowed but risky given drawdown limits |
What Happens When You Break a Rule
Breaking a hard rule (daily loss, max drawdown) results in immediate account termination. Your challenge fee is lost and you cannot continue.
Breaking a soft rule (news trading, consistency) may result in:
- Trade reversal (profit removed)
- Warning
- Account suspension pending review
- Account termination (severe or repeated violations)
How to Stay Safe
- Know every rule before you start trading
- Set personal limits below the firm's limits
- Use a trade journal to track your compliance
- Set alerts for drawdown levels
- Avoid trading during news unless you're certain it's allowed
- Close positions before weekends unless explicitly permitted
Conclusion
Prop firm rules exist to ensure traders manage risk properly. They're not designed to trick you — they're designed to filter for consistent, disciplined traders. Understanding these rules thoroughly before you start will save you money, frustration, and wasted time.
Compare the specific rules of different firms on our rules comparison page to find the firm that best matches your trading style.
