Prop Firm Guide

Introduction

Prop firms have gone from a niche trader perk to a $1B+ retail industry. For a few hundred dollars you can take an evaluation that, if you pass, gives you a funded account with 50K to 250K+ of buying power and an 80/20 split on profits.

They’re also the fastest way to waste $500. Most retail traders fail their first eval - usually in week two, usually to a rule they didn’t fully understand. This guide is the operational manual: how the rules actually work, how to pick a firm, and the exact discipline that keeps you on the right side of the drawdown.

How Prop Firms Work

The model:

1. 1
   You pay an evaluation fee

   One-time or monthly. $50–$500 depending on account size.
2. 2
   You trade a demo account under rules

   Usually 1–3 phases. Hit profit targets without breaking drawdown or consistency rules.
3. 3
   If you pass, you get a funded account

   Still a demo account on the firm’s side, but you can withdraw a share of P&L.
4. 4
   You trade the funded account under rules

   Often slightly looser than eval. Max drawdown still applies. Payouts go on a schedule.
5. 5
   Firm pays you a profit split

   Typically 80% to you, 20% to the firm. Some offer 90%+ after first payout or scaling milestones.

Evaluation vs Instant Funding

Evaluation (1-step)

Single phase. Hit a profit target (usually 8–10%) within a time limit, without breaking drawdown. Most common model.

Evaluation (2-step)

Two phases, typically 8% + 5%. Longer path but often lower fees and tighter rules overall.

Instant funding

Pay a higher upfront fee, skip the eval, trade a funded account immediately. Drawdown rules are tighter. Good for proven traders; rough for new ones.

Hybrid / Express

Various shortcuts - pay a bit more, skip a phase. Read the specific firm’s doc.

The Rules You Must Understand

Rules vary firm-to-firm, but these five show up everywhere. Understanding them precisely is the difference between passing and blowing up in week two.

Profit target

Account must grow by X% (commonly 8% phase 1, 5% phase 2). Usually a one-shot goal; hit it and you advance.

Max overall drawdown

Total loss allowed from initial balance (or from peak - see next chapter). Hit it and the account is terminated immediately.

Daily loss limit

Max loss in a single day (usually 4–5% of starting balance). Hit it and you fail - even if overall drawdown is fine.

Minimum trading days

Must trade on X separate days to pass (often 5–10). Prevents one-lucky-day passes.

Consistency rule

No single day can contribute more than X% (commonly 30–50%) of total profit. Prevents one-day pass-and-cash-out.

Static vs Trailing Drawdown

This one kills more traders than any other rule. There are three flavors:

Static (end-of-day) drawdown

Fixed dollar amount below starting balance. Doesn’t move. If account is $50K and DD is $2.5K, floor is always $47.5K. Friendliest for swing traders.

Trailing drawdown (on balance)

Floor trails the peak closing balance, NOT intraday peak. Example: +$1,500 profit day → floor moves up by $1,500. Standard on FTMO, The5ers, Funded Next.

Trailing drawdown (on equity / mark-to-market)

Floor trails the peak unrealized equity - including open-trade profits you never actually locked in. Rips people who let winners run unrealized, then the market reverses. Standard on Topstep. Apex is similar.

Firm by Firm

Snapshot of the major firms (rules shift - verify with the firm before paying).

FTMO

The original. 2-step, 10%+5% targets, 5% daily / 10% overall drawdown (trailing on balance). Forex / indices / crypto / commodities. Swing accounts available. Strong reputation for paying.

The5ers

High-Stakes (2-step) or Bootcamp (3-step, slower). Swing-friendly. Scaling plans. FX-heavy. Lower fees than FTMO but longer path to max funding.

MyForexFunds

Was a market leader; shut down by CFTC in 2023. Instructive cautionary tale on the regulatory side.

Funded Next

FX + commodities. Stellar / Express variants. 2-step eval. Reasonable rules. Growing reputation.

Topstep (futures)

The biggest futures prop. Trailing drawdown on mark-to-market - the toughest rule type. Micros allowed. Strong brand.

Apex Trader Funding (futures)

Futures focus. Trailing drawdown until account hits a threshold, then static. Popular because the path to “static” is clear.

My Funded Futures (MFFU)

Newer futures prop. Competitive pricing. Trailing with a threshold model similar to Apex.

Earn2Trade (futures)

Education-heavy onboarding. Longer evaluations. Lower-stakes vibe.

Picking a Firm

1. 1
   Match the market you trade

   Trade FX? FTMO, The5ers, Funded Next. Trade futures? Topstep, Apex, MFFU. Trade stocks? Fewer options - Trade The Pool, some FTMO variants.
2. 2
   Read the drawdown rule

   Static / trailing-on-balance / trailing-on-MTM. Your strategy determines which is survivable. Swing trader? Avoid trailing-on-MTM.
3. 3
   Check payout track record

   Search YouTube for payout proofs. Look for frequency and size. Firms that went rogue usually leave a trail of unpaid traders first.
4. 4
   Compare fee structure

   One-time vs monthly. Reset fees. Instant-funding premium. Compute the total cost of a realistic 2–3 attempt scenario.
5. 5
   Understand scaling plans

   Some firms double your account after X% profit. Others let you stack up to 3–4 accounts. Plan for the account size you actually want to trade.

Picking an Account Size

Bigger account ≠ better. Bigger account means bigger dollar drawdown limit - which sounds good until you realize the tighter firms only let you lose 4–5% daily.

The sizing table

• $25K: $1K daily loss limit. Max 2 ES contracts at reasonable stops. Good starter size.
• $50K: $2K daily loss. Still cheap eval, enough room for mistakes. Most popular size.
• $100K: $4K daily loss. Requires more confidence and more discipline. Scaling-plan endgame for many.
• $150K+: For experienced traders. Higher eval fees. Higher absolute rewards.

The Pass Playbook

1. 1
   Size small

   Risk 0.5% per trade (half a typical 1% rule). Drawdown rules are unforgiving - a normal losing streak shouldn’t put you in danger.
2. 2
   Aim for slow + steady

   Target 0.5–1% per day, not 3%. Consistency rules penalize hero trades. Slow accumulation wins the phase.
3. 3
   Max 1–2 trades per day

   Overtrading is the #1 cause of failure. Quality setups only. If today doesn’t offer one, don’t trade.
4. 4
   Hard daily stop-out

   At 50% of daily loss limit, you’re done for the day. Close the platform. No exceptions.
5. 5
   Flatten before news

   CPI, NFP, FOMC - flatten or sit out. The spread widening + slippage can blow your daily limit in one candle.
6. 6
   Don’t hold through consistency cliffs

   On the day you’re about to hit profit target, SIZE DOWN. A single outsized win day can trigger consistency violations.
7. 7
   Minimum days first, target second

   Hit the minimum trading days before racing to the profit target. A target hit on day 3 of a 10-day minimum means 7 more days of risk before passing.

After You Pass: Managing a Funded Account

Passing is the easy part. Staying funded is harder. Most funded traders lose the account within 60 days.

• Withdraw aggressively. First payout at the earliest allowed date, every time. Realized money cannot be taken back.
• Same sizing as the eval. Don’t size up because “it’s firm money.” Drawdown rules are often similar or tighter.
• Same setups as the eval. If you passed on opening-range breaks, don’t start trading overnight holds.
• Track the drawdown floor daily. Know your exact margin-of-safety number before the session.
• Take breaks. After a losing week, sit out a day. Funded accounts are a salary, not a sprint.

Payouts & Scaling

Profit split

What share of profits you keep. Industry standard: 80/20. Premium scaling: 90/10.

First payout waiting period

Often 14 or 30 days after first profit. Some firms now offer 7 or on-demand.

Minimum withdrawal

Usually $100 or a % of account.

Scaling plan

Account size doubles (or jumps) after hitting X% profit consistently. FTMO, The5ers, Funded Next all have published tiers.

Account stacking

Some firms let you run 3–5 evaluations simultaneously - useful for uncorrelated systems, dangerous if your sizing isn’t disciplined.

Risks (Firm Side)

You’re not just risking the fee - you’re giving someone else custody of your traded record and your payout flow.

• Firm solvency. A firm can go under with your passed account and unpaid payouts. See MyForexFunds (2023).
• Rule changes. Firms update rules. You may pass under one ruleset and find out after that the payout scheme is different.
• Regulatory risk. CFTC has been active in the US. Some firms now block US customers, block states, or restructure under offshore entities.
• Broker dependence. Many firms use specific brokers. If the broker has an outage, you trade on their timeline.
• Delayed payouts. “7-day” can become “30-day under review” when things get tight.

Common Mistakes

• Over-sizing on a “cheap” account to accelerate profit target. Blow daily limit in one bad session.
• Revenge-trading a loss. Second trade always loses more than the first.
• Holding through news without understanding the daily-limit risk.
• Ignoring consistency rules. One $2K day on a $5K eval pass. Firm rejects.
• Switching firms chasing easier rules. The problem is almost never the firm.
• Not tracking drawdown floor live. Waking up thinking you have $1K headroom when you actually have $300 because of yesterday’s open P&L.

Glossary

Track Your Eval in TradeSimple

The #1 reason evals fail is losing track of where the drawdown floor is right now. TradeSimple’s Prop Firm Tracker does this live as you log trades:

• Live daily drawdown vs limit.
• Live overall drawdown vs limit (static or trailing).
• Profit target % progress.
• Minimum trading days count.
• Pass/fail projections based on current trajectory.