How prop firm evaluations work

A prop firm evaluation is a trading test with written rules. If you meet the rules, the firm may give you access to a funded account under its own terms. This guide explains the parts you are likely to meet in a firm's terms, so you can read them with the right questions in mind.

What an evaluation is

You pay a fee to trade an account with a set starting balance, for example a "$50,000 account". The firm sets objectives, such as a profit target, and limits, such as a maximum drawdown. Break a limit and the evaluation ends; meet every objective and you pass.

Evaluation accounts may be simulated, meaning trades are not placed in the live market. Some firms also run the funded stage on simulated accounts. Our risk disclaimer explains what that means for payouts.

Rules you are likely to see

Profit target: The profit you need to reach to pass, stated as a dollar amount or a percentage of the starting balance.
Maximum drawdown: How far the account may fall before it fails. Firms calculate this in different ways; see trailing vs end-of-day vs static drawdown.
Daily loss limit: A cap on losses within one trading day. Some firms have one and some do not.
Minimum trading days: The number of days you must trade before you can pass, even if you reach the target sooner.
Consistency rule: A limit on how much of your total profit can come from a single day. Depending on the firm, breaking it may fail the account or simply raise the target.
Trading restrictions: Rules about news releases, holding positions overnight, position size or specific products.

How fees can be structured

One-time fee or monthly subscription. A one-time fee is paid once per attempt. A subscription is charged each month until you pass, fail or cancel.
Reset fee. A charge to restart an evaluation after breaking a rule, instead of buying a new one.
Activation fee. A charge some firms make when you move from a passed evaluation to a funded account.

Fees may not be refundable, so check each firm's terms before you pay.

After you pass

Passing does not guarantee a funded account or any payout. The funded stage has its own rules, which may differ from the evaluation, and payouts follow the firm's terms:

Profit split: the share of profit paid to you, which may change with account type or balance.
Payout frequency: how often you can request a payout, and any conditions such as a number of profitable days.
Minimums and caps: the smallest payout you can request and the most you can withdraw at once.
Processing time: how long the firm takes to send a payout after you request it.

A worked example (hypothetical figures)

The numbers below are made up to illustrate the rules. They do not describe any real firm.

Starting balance: $50,000. Profit target: $3,000. Maximum drawdown: $2,000. Minimum trading days: 5.
On day 3 the balance reaches $53,100. The target is met, but only 3 of the 5 required days have been traded, so the evaluation is not passed yet.
If a consistency rule allowed no more than 40% of total profit from one day, a single $2,000 day within $3,100 of total profit (about 65%) could fail the account or raise the target, depending on how the firm words the rule.

How to read a firm's terms

Find the official pricing page, rules page, help center and terms of service. Note the date you read them.
Check whether the pages agree. If they do not, ask the firm which one applies and keep the answer in writing.
Read the rules for the funded stage, not just the evaluation.
Check whether the firm accepts traders from your country; see how to check country availability.

For an example of how we record one firm's rules plan by plan, with a source for every value, see our TradeDay review. Our methodology explains how we score the clarity of a firm's terms.