Prop firm rules: daily loss and max drawdown

What it is

Prop firms give you their capital, or a simulated account, under strict rules. The usual ones: a profit target to pass, a maximum daily loss, a maximum overall loss, and sometimes minimum trading days or a consistency rule (no single day can be too big a share of the profit).

The max loss is either static (a fixed level below the starting balance) or trailing (it follows your highest balance or equity up, which is common with futures firms). Breaking either limit, even briefly on open P&L, usually ends the account.

How to spot it

• Read the exact rules: what counts (balance or equity), when the day resets, and how the trailing drawdown is measured.
• Know your current distance to each limit before every trade.

How to use it

• Size so that a normal losing streak can't reach the daily or max loss.
• Practise in UNFLD's backtester with Prop firm challenge mode, which sets a target and loss limits and ends the replay when you pass or fail.
• Track every account's stage, limits, fees and payouts on the Accounts and Funding pages.

Common mistakes

• Trading full size on day one to hit the target fast.
• Forgetting the trailing drawdown follows open profit on some firms.

Related