Prop Firm Evaluation Rules: A Complete Breakdown

Most traders fail evaluations not because they cannot trade, but because they did not read the rules. Each rule is a constraint that shapes how you must trade. Knowing the exact numbers before you start is the difference between a planned pass and a surprised fail.

The two-phase challenge

Most firms (FTMO-style) use two phases.

Phase 1: profit target 8–10%, max daily drawdown 4–5%, max overall drawdown 8–10%, minimum 3–5 trading days, often no time limit (some give 30 days).

Phase 2: profit target 5%, same drawdown rules, minimum 1–3 trading days, usually no time limit (some give 60 days).

One-step challenges collapse both into a single phase with a 10% target and tighter drawdown — faster but harder.

The drawdown rules (the real test)

This is where most candidates fail. Three models exist:

• Static (fixed to starting balance). A $100k account with 10% static drawdown loses at $90,000 — forever. Cushion builds as you profit. Most forgiving.
• Trailing (high-water mark). The floor trails your peak balance up, then locks. A $100k account that peaks at $104k now has a floor at $94k. Harder.
• Balance-based. The floor sits a fixed percent below current balance. Profits shrink your cushion. Hardest — a single winner can put you one loss from failure.

Read the model before paying. A balance-based 5% daily drawdown is harder than a static 10% overall.

The consistency rule

Many firms cap your best day at 30–40% of total profit. If you bank 4% in one day and the cap is 40%, you need at least 10% total profit before that day counts — otherwise it is disallowed and you keep trading. This forces you to spread gains and blocks lottery-style gambling.

Minimum trading days and news rules

Minimum days (3–5) prevent single-trade passes. News rules vary: some ban trading 2 minutes around tier-1 releases; some ban holding through them; some allow anything. Weekend holding is often banned. Violating any of these voids the account with no refund.

Profit split and payout

Once funded, profit splits run 80–90%, scaling to 90% after consistent payouts. First payout usually after 14–30 days, then biweekly or on-demand. Some firms require a minimum payout amount ($100) and charge withdrawal fees.

The bottom line

Evaluation rules are constraints, not suggestions. Know your profit target, drawdown model (static, trailing, or balance-based), consistency cap, minimum days, and news rules before you pay. The drawdown model matters more than the profit split — a 90% split with a balance-based drawdown is harder to keep than an 80% split with a static one.