Rules Explained
Prop Firm Dictionary
Understand every prop firm rule before you start trading.
Account Size
The simulated trading capital the prop firm gives you to trade with. Common sizes are $25K, $50K, $100K, $150K, $200K.
Why it matters: Bigger accounts mean bigger profit targets and bigger drawdowns. Choose a size that matches your actual trading style — not the biggest one available.
Activation Fee
A one-time fee charged by some prop firms after you pass your evaluation before they activate your funded account. Not all firms charge this — some include it in the challenge fee.
Why it matters: This is a hidden cost many traders don't factor in. A $77 challenge could actually cost $176 after activation. Always check before buying.
Broker
The company that holds your trading account, executes your orders, and provides access to the futures markets. Common futures brokers used by prop firms include Rithmic and Tradovate.
Why it matters: Your broker determines the speed and reliability of your order execution. Different brokers have different data feeds, latency, and platform compatibility. Some prop firms lock you into one broker at purchase — choose carefully.
Buffer Requirements
The amount of profit that must remain in your account above the drawdown before you can withdraw funds.
Why it matters: A required buffer protects your account and may limit how much profit can be withdrawn.
Challenge Duration
The amount of time you have to complete the evaluation.
Why it matters: Longer or unlimited durations allow traders to progress at their own pace without unnecessary pressure.
Challenge Fee
The monthly or one-time fee you pay to attempt a prop firm evaluation. This is your cost to prove you can trade profitably under the firm's rules.
Why it matters: Challenge fees vary wildly — from $29 during promos to $500+. Always compare the true cost including activation and reset fees, not just the headline challenge fee.
Consistency Rule
A rule that limits how much of your total profit can come from a single trading day. Usually expressed as a percentage — for example 30% means no single day can account for more than 30% of your total profits.
Why it matters: This is one of the most misunderstood rules in prop trading. You can hit your profit target and still fail if one good day accounts for too much of your gains. Always check if a firm has this rule before buying.
Copy Trading
Whether you are allowed to mirror trades between your own accounts or other accounts.
Why it matters: Many firms prohibit copy trading and violating this rule can lead to account termination.
Drawdown Type
The method used to calculate your maximum allowable loss (Static, End-of-Day Trailing, or Intraday Trailing).
Why it matters: Your drawdown type has the biggest impact on how much risk you can take and how easily you can pass an evaluation.
EA / Bots Allowed
Indicates whether Expert Advisors, automated strategies, or trading bots are permitted.
Why it matters: If you use automation, make sure your chosen firm supports it before trading.
EOD Trailing Drawdown
End of Day Trailing Drawdown. Your maximum loss limit trails up as your account balance grows — but only locks in once per day at market close, not tick by tick during the session.
Why it matters: EOD trailing is the most forgiving drawdown type. Your intraday profits don't count against your drawdown until the day ends. A big green day that reverses won't kill your account as long as you close flat or positive.
Funded Account
The account you receive after passing your evaluation. You trade with the firm's capital and keep a percentage of the profits you generate.
Why it matters: Getting funded is the whole point of the challenge. Understanding the rules of your funded account — which are often different from evaluation rules — is just as important as passing.
Hold Through News
Whether the firm allows you to keep positions open during major economic news releases like NFP, FOMC, or CPI announcements.
Why it matters: News events cause massive price spikes that can blow accounts in seconds. Some firms ban holding through news entirely. Violating this rule is an instant account termination at most firms.
Inactivity Rules
The maximum period your account can remain inactive before action is taken by the firm.
Why it matters: Failing to meet activity requirements may result in account suspension or closure.
Intraday Trailing Drawdown
Your maximum loss limit trails up in real time as your account profits grow during the trading session — not just at end of day.
Why it matters: Intraday trailing is more aggressive than EOD trailing. If you make $1,000 in the morning and give it all back by afternoon your drawdown has trailed up and you could be closer to failing than when you started the day. Understand this before trading.
Leverage
The ability to control a large position with a relatively small amount of capital. Futures contracts are inherently leveraged — one ES contract controls $250,000+ worth of the S&P 500.
Why it matters: Leverage amplifies both profits and losses. Understanding the leverage of each futures contract you trade is essential — especially when managing drawdown limits on a prop firm account.
Margin
The minimum amount of capital required to open and hold a futures position. Prop firms set their own margin requirements which may differ from exchange minimums.
Why it matters: Margin requirements determine how many contracts you can trade simultaneously. Exceeding your firm's margin requirements can result in automatic position liquidation even if you haven't hit your drawdown limit.
Max Accounts
The maximum number of evaluation or funded accounts you can have with the firm.
Why it matters: More accounts can increase your overall buying power and profit potential.
Max Daily Loss
The maximum amount you can lose in a single trading day before violating the firms daily loss limit.
Why it matters: Exceeding this limit can result in your evaluation or funded account being breached, even if your total drawdown hasn't been reached.
Max Daily Loss (soft breach)
The maximum amount you can lose in a single trading day before your account is restricted until the next trading day.
Why it matters: Soft breaches do not usually fail your account, but they stop you from trading for the rest of the day.
Max Drawdown
The absolute maximum your account balance can drop before you fail. At this point your account is terminated and you must start again.
Why it matters: This is your hard floor. Know this number before you place a single trade. Many traders blow accounts simply because they didn't fully understand how close they were to their max drawdown.
Max Payout Request
The maximum amount you can withdraw per payout request.
Why it matters: Some firms cap early withdrawals while others allow unlimited payouts.
Max Position Size
The maximum number of contracts you can hold in a single position.
Why it matters: Exceeding the limit may violate the firms rules and could result in a failed evaluation or account breach.
Max Resets
The maximum number of times an evaluation can be reset.
Why it matters: Some firms allow unlimited retries, while others limit how many resets you can purchase.
Micro Contract
A smaller version of a standard futures contract — typically 1/10th the size. For example MES is the micro version of ES (S&P 500) and MNQ is the micro version of NQ (Nasdaq).
Why it matters: Micro contracts allow traders to manage risk more precisely. Some prop firms allow micros during evaluation but restrict them on funded accounts — always verify before trading.
Min Daily Profit
The minimum profit required on a trading day for that day to count toward payout or qualification requirements.
Why it matters: Some firms require profitable days above a certain amount before allowing withdrawals.
Min Payout Request
The smallest amount you can withdraw in a single payout request.
Why it matters: Higher minimums mean you'll need to accumulate more profit before requesting a withdrawal.
Min Trading Days
The minimum number of qualifying trading days required before you can pass an evaluation or request a payout.
Why it matters: Even if you hit the profit target early, you will still need to satisfy the required number of trading days.
Mini Contract
A mid-sized futures contract smaller than a standard contract but larger than a micro. For example ES (E-mini S&P 500) is already a mini contract — 1/5th the size of the full S&P 500 futures contract.
Why it matters: Most prop firm traders use mini contracts as their standard trading size. Understanding the difference between mini and micro helps you size positions correctly within your max contract limits.
News Trading
Determines whether you are allowed to open or close trades during major economic news events.
Why it matters: If your strategy relies on volatility, choosing a firm that allows news trading is important.
Overnight Holding
Whether you are allowed to keep positions open after the market's daily close — typically 5:00-6:00 PM ET for futures.
Why it matters: Most futures prop firms do not allow overnight holding. If you are a swing trader who holds positions for multiple days you must specifically look for firms that allow this — very few do.
Path to Go Live
Explains whether traders move directly to a live account or first trade in a simulated funded environment before transitioning to live capital.
Why it matters: Some firms place traders into live accounts immediately, while others require consistent performance before routing trades to live markets.
Payout Frequency
How often you can request withdrawals (daily, weekly, bi-weekly, monthly, etc.).
Why it matters: More frequent payouts provide faster access to your trading profits.
Payout Qualification
The requirements you must meet before becoming eligible to request your first payout.
Why it matters: These requirements vary significantly between firms and determine how quickly you can withdraw profits.
Payout Speed
How quickly the prop firm processes your withdrawal after you request it. Can range from same day to several weeks depending on the firm.
Why it matters: Fast payouts are a major trust signal. Firms that delay payouts without explanation are often struggling financially. Always check community reviews about payout experiences before choosing a firm.
Platforms
The trading software you use to place orders, view charts, and manage your positions. Common futures platforms include NinjaTrader, Tradovate, TradingView, Quantower, Sierra Chart, and Bookmap.
Why it matters: Your platform determines what tools you have access to. If you rely on specific charting tools, order flow features, or DOM ladders — always verify your firm supports your preferred platform before purchasing a challenge.
Profit Split
The percentage of profits you keep versus what the prop firm keeps. For example a 90% profit split means you keep 90 cents of every dollar you make.
Why it matters: This directly determines how much money you take home. A 90% split on a $5,000 month means $4,500 to you. Compare profit splits carefully — and watch for tiered structures where the split improves after multiple payouts.
Profit Target
The minimum profit you must reach during your evaluation to qualify for a funded account.
Why it matters: Chasing your profit target too aggressively is one of the most common reasons traders fail evaluations. Treat the profit target as a minimum to reach over time — not a goal to hit as fast as possible.
Reset Fee
The cost to restart an evaluation after failing.
Why it matters: Lower reset fees can save money if you need multiple attempts.
Scaling Plan
A program offered by some prop firms that automatically increases your account size as you hit certain profit milestones consistently over time.
Why it matters: Scaling plans let you grow your trading capital without paying for a new challenge. A firm with a strong scaling plan can take you from a $50K account to $200K+ based purely on performance.
Scalping Allowed
Whether short-term, rapid-entry trading strategies are permitted.
Why it matters: Some firms restrict scalping, while others are designed specifically for it.
Static Drawdown
A fixed maximum loss limit that never moves regardless of your profits. If your max drawdown is $2,000 it stays at $2,000 whether you make $10,000 or lose $500.
Why it matters: Static drawdown is the most forgiving type because it never tightens as you profit. It gives you a fixed safety net that doesn't shrink — ideal for traders who want maximum breathing room.
Stop Loss
An order that automatically closes your position when price reaches a predetermined loss level — limiting how much you can lose on a single trade.
Why it matters: Some prop firms mandate stop losses on every trade enforced at the platform level. Trading without a stop loss can result in a single trade blowing your entire account. Always use stop losses regardless of whether your firm requires them.
Trailing Drawdown
A drawdown limit that follows your account balance upward as you profit — but never comes back down. The more you make the higher your floor rises.
Why it matters: Trailing drawdown is the single most important concept in futures prop trading. Whether it trails EOD or intraday completely changes your risk management approach. Never trade a prop firm account without fully understanding how their trailing drawdown works.
Weekend Holding
Whether you are allowed to keep positions open over the weekend when most futures markets are closed or have very low liquidity.
Why it matters: Weekend gaps — when price opens significantly higher or lower Monday than where it closed Friday — can be devastating. Most prop firms prohibit weekend holding to protect both the trader and the firm from gap risk.