Profit target, maximum drawdown, daily loss — and which one actually fails people.
advanced · 3 min read · 20 XP
Before you can plan around the rules you have to read them precisely, because two firms using the same words can mean materially different things. This lesson goes through each rule and what it does to your trading.
1. Profit target. Typically 8–10% of the account in phase one. This is the goal, and it is the rule people focus on almost exclusively.
2. Maximum drawdown. Usually 8–12%. The hard floor. Breach it and the challenge is over.
3. Daily loss limit. Usually 4–5%. Breach it in a single day and the challenge is over, even if total drawdown is fine.
4. Minimum trading days. Often 3–10 days, to stop someone passing on one lucky trade.
Which rule actually fails people
Not the profit target — the drawdown rules. Failing traders overwhelmingly fail by breaching a loss limit, usually while trying to accelerate toward the target after a slow start. The evaluation is a survival test with a profit target attached, not a profit test with a risk rule attached.
This is the distinction that catches people, and it is worth reading your firm's exact wording twice.
Static. The floor is fixed at the starting balance minus the allowance. Start at $100,000 with 10%: the floor is $90,000 permanently. Grow the account to $108,000 and the floor is still $90,000 — you now have $18,000 of room.
Trailing. The floor follows your equity high. Reach $108,000 and the floor rises to $98,000. Your room is always 10% from the highest point you ever reached, often including unrealised peaks.
Trailing is dramatically harder. A trade that goes 3% in your favour and then reverses can move the floor up against you before you have banked anything.
Read whether trailing uses equity or balance
Some firms trail the high-water mark on equity, meaning an unrealised profit you never took still ratchets your floor up. Under that rule, letting a big winner give back most of its gain can push you closer to failure than never having taken it. This single clause changes how you should manage winners.
Work backwards from the daily loss limit, not forwards from the target.
With a 5% daily loss limit and a rule that you will never risk more than half of it in a day, you have 2.5% of daily risk to allocate. At 0.5% per trade that is five trades before you stop for the day — a workable, non-panicked structure.
Contrast with risking 2% per trade: three losses in a day and you are at the limit. Given that a three-loss day is completely normal, that sizing makes failure a routine occurrence rather than a rare one.
Size a trade inside prop rules
Interactive exercise — enable JavaScript to try it.
An 8% target at 0.5% risk per trade with a 1:2 risk-to-reward ratio needs a net +8R. At a 45% win rate that is roughly 40–60 trades — a few weeks of normal trading, not a sprint.
That is the point worth internalising: the target is reachable at small size. The temptation to size up comes from impatience, not from arithmetic.
Because passing required discipline that was experienced as temporary. Once funded, the constraint feels lifted and size creeps up — but the drawdown rules on a funded account are usually the same or tighter. The traders who last treat the evaluation rules as their permanent risk framework rather than a hurdle to clear.
What to remember
A prop evaluation is a constrained optimisation where the binding constraint is the drawdown rule, not the profit target. Trailing drawdown that follows an equity high is materially harder than static drawdown. Size backwards from the daily loss limit, and treat the evaluation rules as a permanent framework rather than a hurdle.