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Prop firm rules explained: the full rule sheet, decoded

Every prop firm has a rule sheet, and one missed line can end an account. Here's how to read the whole thing, sorted into 4 simple groups.

Beginner guide · 9-minute read · Updated 2026-10-21

Why the rules matter more than the trading

A Prop firm lets you trade an account under its rules. Break one, and the account can close, even on a day you made money.

That's why reading the rules is step one. Our guide to the prop firm challenge covers the 3 big numbers: the target, the daily loss limit and the trailing drawdown. This page covers the whole sheet, including the small print.

Every firm is different, and firms change their rules often. Treat the numbers here as made-up examples to show how rules work, not any real firm's terms.

The 4 groups of rules

Almost every rule fits in one of 4 groups:

Let's go through each.

Group 1: money rules

Profit target

The amount the account must grow to pass. Example: $3,000 on a $50,000 account.

Daily loss limit

How much you can lose in one day. Example: $1,000. At some firms, hitting it ends the day. At others, it fails the account. That difference is huge. Read which one applies. Our daily loss limit guide explains why traders set one anyway.

Max drawdown

The total drop allowed from a starting point or a high point. It comes in a few styles:

• Static: a fixed floor that never moves.
• End-of-day trailing: the floor rises with your highest closing balance.
• Intraday trailing: the floor rises with your highest balance during trades, including gains you never locked in.

This one rule changes everything. It has its own guide: trailing drawdown explained.

Group 2: time rules

• Minimum trading days. You may need to trade at least a set number of days to pass, even if you hit the target sooner.
• Time limits. Some evaluations have a deadline. Many now don't, but may charge a monthly fee until you pass.
• Close-by time. Positions may have to be flat by a set time each afternoon. Holding overnight or over the weekend may be banned.
• Inactivity. Some firms close accounts with no trades for a set number of days.

Group 3: behavior rules

• Consistency rules. No single day can be too big a share of your total gains. Explained fully in prop firm consistency rules.
• Contract limits. A maximum position size, sometimes rising as the account grows. See prop firm scaling plans.
• News rules. Some firms limit trading for a few minutes around big releases like CPI or the FOMC decision.
• Banned strategies. Common examples: copying trades across accounts you don't control, opposite positions in two accounts, or trying to exploit how the simulated fills work.

Group 4: account rules

• Fees: evaluation, reset, activation, sometimes monthly.
• Data and platform costs: real-time futures data and trading software may cost extra.
• Account limits: a maximum number of accounts per person.
• Identity checks: usually required before any payout.
• Simulated or live: many funded stages are simulated, with payouts based on results. Read exactly which yours is.

A worked example: how much room the rules really leave

Rules: $50,000 account, $1,000 daily loss limit, $2,000 trailing drawdown. You trade MES (Micro E-mini S&P 500). One tick = 0.25 points = $1.25, so 1 point = $5.

You plan a stop 8 points away.

Run your own numbers with the futures tick value calculator and the position size calculator.

The 12-question checklist

Before you pay any fee, find the answer to each one in the firm's own written rules:

1. What is the profit target?
2. What is the daily loss limit, and does hitting it end the day or the account?
3. What style is the max drawdown: static, end-of-day trailing or intraday trailing?
4. When does the drawdown stop trailing, if ever?
5. Is there a minimum number of trading days?
6. Is there a consistency rule, and in which stage?
7. What is the max position size, and does it change?
8. Are there news-time limits?
9. Must positions be closed by a set time?
10. Which strategies are banned?
11. Is the funded stage simulated or live?
12. What are all the fees, including resets, activation and data?

If you can't find an answer, ask in writing and keep the reply.

Common mistakes

• Reading only the headline numbers. The small print is where accounts end.
• Assuming the rules are the same as last time. Firms update them often.
• Sizing for the target, not the limits. The limits decide how many mistakes you can survive.
• Missing the close-by time. One forgotten position can break a rule.

Try it today

1. Pick any firm's public rule page. Don't pay anything.
2. Answer all 12 questions above in a notebook.
3. Using your usual stop size, work out how many stops in a row it takes to reach the daily limit.
4. Run your last 20 practice trades through those rules. See practice trading without money.
5. Circle the first rule you'd have broken. That's the habit to work on.

Questions