Prop Firm Rules Explained: Every Rule, With Worked Examples

Prop firm marketing shouts about the funded account. The rulebook is where the money is actually won or lost. Daily drawdown, maximum drawdown, profit target, minimum trading days, consistency, weekend and news restrictions, each of these can end a challenge in a single afternoon if you misread how the number is calculated. This page walks through every rule you are likely to meet, with the arithmetic laid out so you can compare firms honestly instead of relying on the sales page.

The exact figures vary between firms and change often, so we will illustrate with common values. For actual current thresholds, always check the firm's rulebook the day you purchase. Where we mention firms by name, treat that as a starting point for your own due diligence rather than a specification.

Daily drawdown, or the "one bad day" rule

Daily drawdown is the largest loss you are permitted to accumulate within a single trading day. Cross the line and the account is closed, regardless of your overall profit. It exists because firms will not underwrite a trader who can lose ten percent in an afternoon.

How it is calculated

Two calculation methods are common, and reading the wrong one is a classic way to blow up:

• End-of-day balance basis. The daily floor is set from the balance at the end of the previous day's server session.
• Equity high basis. Some firms use the equity peak of the current day for open positions. If you are up 3% mid-day, that becomes the new reference point and your daily floor rises with it.

Most firms use the balance basis, but a growing number use equity. Confirm which method applies before you pyramid into a winning position.

Worked example

Account: $100,000. Daily drawdown: 5%.

• Yesterday closed at $102,000.
• Today's floor = $102,000 - 5% of $100,000 = $102,000 - $5,000 = $97,000.
• You take a loss and equity drops to $97,050. Safe, but only by $50.
• An open floating loss that dragged equity below $97,000 at any tick would close the account, even if the trade later returned to profit.

Notice the subtle detail: it is intra-tick equity that matters. A trader who "closed" the trade at a small loss but had briefly floated below the floor may still be found in breach.

Maximum drawdown: static vs trailing

Maximum drawdown is the account's absolute floor. Cross it, ever, and the account is gone. There are two flavours, and they behave very differently.

Static maximum drawdown

The floor is fixed at inception and stays there. On a $100,000 account with a 10% static maximum, the floor is $90,000 for the life of the account. Whether you have earned $5,000 or $50,000, the number does not move.

Static is trader-friendly. Early profits act as an expanding buffer. Once you are up $10,000, you effectively have a 20% buffer to work with before the account is closed.

Trailing maximum drawdown

The floor moves upward with new equity or balance highs. On a $100,000 account with a 10% trailing maximum, the floor is initially $90,000. Push equity to $110,000 and the floor climbs to $100,000. Push it to $115,000 and the floor climbs to $105,000. Many firms lock the trailing floor once it reaches the initial balance ($100,000 in this case), converting trailing into static from that point on.

The awkward part of trailing is that a small equity high can raise the floor and then a modest drawdown wipes out the buffer you thought you had. Traders who scale in aggressively early can find themselves boxed in by their own equity peak.

Neither method is inherently better, but static is significantly more forgiving. If you are new to prop challenges, prefer static rules while you learn how tight the equity curve really needs to be.

Profit target

The profit target is the milestone you must reach without breaking any other rule. On a two-step evaluation, common targets are 8-10% for phase one and 4-5% for phase two. One-step formats often use 8-10% in a single go. Instant funding usually has no phase target at all; you go straight to profit-split payouts once the account is active.

Worked example

Account: $100,000. Phase one target: 8%. Phase two target: 5%.

• Phase one requires equity of at least $108,000 on any day, after the minimum trading days have been satisfied and no other rule has been broken.
• Phase two, on a fresh $100,000 balance, requires $105,000.
• Once passed, the funded account begins under looser conditions. Any additional profit becomes payout-eligible.

Understand that the target must be present and stable. A momentary equity spike that closes back below the target may not count unless the firm accepts intraday touches. Read the small print.

Minimum trading days

Most firms require you to trade on at least a set number of separate days during a phase. The number is commonly 3, 4 or 5. A "trading day" is usually defined as any day on which at least one position was opened and closed, or on which round-trip volume exceeded a small threshold.

The purpose is to prevent a trader from doubling the account in a single reckless session and calling themselves consistent. If your strategy naturally trades every day, the rule is invisible. If you scalp only around specific news windows, plan a small "attendance" trade on non-signal days to keep the day count ticking, always inside your usual risk parameters.

Consistency rule

Consistency is one of the least understood rules in the industry. It comes in several forms:

• Best day rule. No single day's profit may exceed a percentage (commonly 25-45%) of the total profit at payout time.
• Trade size consistency. The largest lot size used must not exceed a certain multiple of the average lot size.
• Number of trades consistency. The number of trades per day must fall within a reasonable band.

The best day rule causes the most confusion. Its purpose is to stop traders passing on a lucky one-shot. Our dedicated consistency rule guide walks through worked calculations and how to trade around it.

Weekend and overnight hold rules

Some firms restrict holding positions over specific periods to reduce gap risk on their books.

• No weekend hold. All positions must be flat by Friday close. Any position left open triggers a breach.
• No overnight hold. All positions must be flat by end of day (usually broker server midnight).
• Weekend hold allowed with a size cap. Positions may remain open but total exposure is capped.

Swing traders should shortlist firms that allow weekend holds without penalty. Day traders and scalpers have their pick of the market.

News trading restrictions

Most firms restrict trading around Tier-1 news events (typically FOMC, NFP, CPI, ECB, BoE releases). The typical rule is a "news window" of 2 minutes before and 2 minutes after the release during which you cannot open or close a position. Some firms extend this to 5 minutes on either side, or ban discretionary news trading on their funded programme altogether.

Consequence of breach ranges from a warning to immediate account closure. Full detail with a firm-by-firm summary is in our news trading and prop firms article.

EA, copy trading, martingale and hedging

Automated and semi-automated strategies attract the most scrutiny because they can be replicated across many accounts to game the firm.

• Expert Advisors. Widely allowed on evaluations, more often restricted on funded accounts. Prohibited techniques include latency arbitrage, tick scalping exploits, hedging arbitrage between correlated instruments, and grid or martingale patterns that add on losers.
• Copy trading. Usually banned across accounts held by the same person, and sometimes across friends. Firms actively detect identical trade timing.
• Martingale. Explicitly banned by most firms. Doubling down on losing positions is a fast route to account closure whether or not the strategy would eventually recover.
• Hedging. Basic same-symbol hedging is generally allowed. Cross-account hedging (long on one firm, short on another) is a fraud vector and firms are getting better at detecting it.

Leverage and lot size caps

Nominal account leverage on prop programmes usually ranges from 1:10 for indices to 1:100 for FX. Some firms cap the maximum lot size regardless of leverage. On a $100,000 account, a 5-lot cap on major FX equates to roughly $500,000 of exposure at any moment. If you swing traders would normally exceed that on a strong setup, filter it out at the shortlist stage.

Time limits and reset rules

Historically evaluations came with a 30-day time limit. In 2026 many programmes have removed the time cap, but not all. Time-limited programmes create a race to the profit target which is where most breaches happen. Unlimited-time programmes cost slightly more up front but are much easier psychologically.

If you breach a rule during evaluation, some firms sell a "reset" that restores the balance and starts the phase again for a fraction of the full challenge fee. Others require a fresh purchase. Resets are convenient but they normalise breaching, so use them sparingly.

Payout eligibility rules

Once funded, the rules governing when you can withdraw are separate from the phase rules. Common conditions:

• A minimum funded balance above the starting balance (e.g., at least 1% profit before requesting a payout).
• A minimum number of trading days on the funded account since the last payout.
• Not being in an open trade at the time of the payout request.
• Passing any consistency check applied at payout time.

For a deeper look at withdrawal frequency, splits and typical monthly income, see the payouts and profit splits guide.

Which rules matter most for your style?

Match the rulebook to how you actually trade.

• Scalpers should focus on daily drawdown method (equity vs balance), news windows and any minimum stop-loss requirement.
• Day traders should focus on daily drawdown, consistency rule, and profit target time pressure.
• Swing traders should focus on weekend hold permission, static vs trailing max drawdown, and unlimited time.
• EA users should focus on automation permissions on both evaluation and funded phases.

How to compare firms honestly

When two firms look similar on the sales page, use this quick checklist:

1. Is the maximum drawdown static or trailing? If trailing, does it lock at the initial balance?
2. Is the daily drawdown based on balance or equity?
3. Is there a consistency rule at payout time, and if so, what is the cap?
4. Is news trading allowed, restricted, or banned on evaluation and on funded?
5. Are weekend holds permitted?
6. What is the payout frequency after the first payout, and are payouts on demand?
7. What is the fee for a reset, and how often are resets offered?

Two firms that both advertise "$100k funded" can differ by an order of magnitude on the difficulty of actually keeping the account. The rulebook is the whole story.

Continue exploring: our comparison of two-step vs one-step formats, the shortcut of instant funding, and a full introduction to prop firms.