Prop Trading
Proprietary trading firms give traders access to a firm's capital through a simulated funded account, earned by passing a rules-based evaluation. This hub defines the 12 concepts that decide whether a trader passes the evaluation, keeps the account, and gets paid.
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Prop trading guides
- How prop trading worksHow proprietary trading firms operate: the model, the evaluation, profit splits, and why only the fees are at risk, not your own trading capital.
- How prop firm challenges workThe core prop challenge rules in detail: profit target, daily loss limit, maximum drawdown, minimum trading days, and the consistency rule.
- Drawdown types explained: static, EOD, and intraday trailingStatic, end-of-day trailing, and intraday trailing drawdown compared. Why the same trading passes one rule and breaches another.
- The math of prop trading: expected cost and expected valueThe expected cost of a funded account once the pass rate is counted, the FPFX industry data, and the expected-value arithmetic. No advice.
How the evaluation works
- 1Pay the evaluation fee
A one-time fee is the trader's only financial exposure. No personal capital enters the market.
- 2Complete the evaluation
Hit the profit target without breaching the daily loss limit or total drawdown limit. Failing either rule ends the challenge immediately.
- 3Receive a funded account
A simulated account provisioned by the firm. The capital belongs to the firm; the trader earns a share of the net simulated profit.
- 4Trade within the rules
Funded accounts keep loss limits, which can differ from the evaluation's, plus any consistency rule that affects payout eligibility; the funded-account agreement sets them.
- 5Withdraw profits
Subject to the firm's payout schedule, minimum trading day requirements, and profit split terms. All terms vary between firms.
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- PayoutsFunded Account A prop firm's account, usually simulated, granted after an evaluation or on instant funding. Profit split mechanics, drawdown rules, and what 'funded' means.
- EvaluationEvaluation Phase The test a trader must pass to get a prop firm's funded account. Profit targets, drawdown limits, time constraints, and what the firm measures.
- Account RulesMaximum Drawdown The total loss limit on a prop account. Static, trailing, and EOD variants, how the floor is measured, and what happens on a breach.
- Account RulesTrailing Drawdown A floor that rises with the account's highs (equity or balance, by firm) and never moves down. Intraday vs EOD variants, and why it kills accounts.
- Account RulesDaily Loss Limit Caps how much an account can lose in a single trading day. How firms set the limit, when the counter resets, and what a hard or soft breach does.