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Master the terminology. From Trailing Drawdowns to Consistency Rules, understand exactly what your prop firm's rules mean before you buy a challenge.
A rule required by some prop firms stating that no single trading day can account for more than a certain percentage (usually 30-50%) of your total profits, designed to prevent passing via lucky gambles.
The maximum amount you are allowed to lose in a single trading day, calculated from the day's starting balance or equity. Typically 4% to 5%.
The absolute lowest your account balance or equity is allowed to drop before you fail the evaluation or lose your funded account. Typically set at 8% to 12%.
A trader-friendly drawdown calculation where your daily or max drawdown limits are only updated based on your balance at the end of the trading day, ignoring intraday high-water marks.
Automated trading software or bots used on MetaTrader platforms to execute trades without manual intervention. Some prop firms ban High-Frequency Trading (HFT) EAs.
Opening two opposite positions (e.g., Long EURUSD and Short EURUSD) simultaneously. Prop firms generally ban reverse arbitrage or cross-account hedging.
The peak value an account has reached. Often used to calculate trailing drawdowns or to determine profit splits above the initial starting balance.
A prop firm model where you bypass the evaluation/challenge phase entirely and immediately receive a live funded account, usually in exchange for a higher upfront fee.
A risky money management strategy where a trader doubles their position size after a loss. Most prop firms explicitly ban this trading style.
Entering or closing trades during high-impact macroeconomic data releases (e.g., NFP, CPI). Many firms prohibit trading 2 minutes before and after these events.
The percentage of profits a funded trader gets to keep. Industry standard in 2026 is 80% to 90%, with some firms offering up to 100% after scaling.
A program where a prop firm increases your maximum capital allocation (e.g., from $100K to $200K) if you consistently achieve specific profit targets over several months.
The difference between the expected price of a trade and the price at which the trade is actually executed, common during high volatility.
A strict drawdown rule where your maximum loss limit follows your highest open profit (high-water mark). If you are up $2,000 and the price reverses, your drawdown limit stays at the higher watermark.