You've probably noticed the trend if you've spent even a minute exploring the futures prop firm universe: they all have rules. Not just don't lose money restrictions, but a strict set of guidelines that make you feel like you're back in high school, only that breaking them results in account loss rather than punishment.
Two of the most notorious? Maximum drawdowns and maximum loss per day. You're not only climbing the mountain; you're also climbing the firm's expectations when you include the other subtle constraints like position limits, scaling strategies, consistency criteria, and minimum trading days.
Why These Rules Are in Place
Prop firms aren't giving you their money because they want to be your personal ATM. They're in the business of making money and as any business is, risk management is the game.
If you were having strangers play with your cash, you wouldn't want them to blow it up in a single wild afternoon, would you? That's where these rules are in place—they're there to:
- Preserve the firm's capital
- Eliminate gamblers
- Promote consistency rather than home-run swings
- Develop a fair playing field for every trader
When you get to know the why behind all these rules, they actually make you a good trader. Irritating? Occasionally.
Daily Drawdown: The Stealthy Killer
The daily drawdown is the rule that is surprising in Futures trading for beginners the most, if I had to choose just one.
What it is: The maximum amount you can lose in a single trading day before you get the dreaded terminated notification on your account.
Two main tastes are present:
- Static Daily Drawdown: A set amount of money. For example, "Avoid losing more than $1,000 in a single day."
- Trailing Daily Drawdown: As your equity reaches its peak, the limit rises. Your daily loss limit may increase if your account starts at $50,000 with a $2,000 daily restriction and ends the day at $51,000. As a result, you won't be able to drop below $49,000 from that new high tomorrow.
Why traders violate it:
- Revenge trading following a loss
- Overleveraging in early hours
- Forgetting commissions are applied towards losses
- Not realizing how the trailing version operates
How not to break it:
- Set your own soft stop before you arrive at the firm's hard stop.
- Reduce the size of your risk for the remainder of the trading day if you are down early.
- Find out the exact calculating process used by the company; it's not always obvious.
Bottom line: Your excellent setup that is about to improve is not a concern of the daily drop. Game over when you get there.
Max Loss: The Final Boss
While the daily drawdown is the mid-level villain, the max loss is the last boss that completely ends your funded account.
What it is: The greatest amount that your account balance can decrease from its starting point (or peak, depending on the business). You're done after you pass this point.
You cannot allow equity to go below $47,000, for example, if your account has a $50,000 initial value and a $3,000 maximum loss.
Crucial details to be mindful of: Some companies use trailing maximum loss, where the loss cap "trail" your account higher as your earnings increase. Others reset it to the initial sum upon a predetermined earnings threshold.
Why traders break it:
- Carrying over losers overnight (in companies that permit it)
- Misinterpreting the open trade equity rules
- Going tilt following a losing streak
Survival advice:
- Always have your precise liquidation point mapped out before you begin to trade
- Don't view it as room to lose—view it as "room to make errors" (and make errors small)
- Monitor unrealized losses as well—most companies tally them toward the limit
Other Rules You Can't Ignore
Daily drawdown and max loss receive most of the focus but prop firms have additional rules that can catch you out if you're not careful.
Minimum Trading Days
You can't get one giant win and withdraw. Most firms force a number of trading days (usually 5–10) before passing an evaluation or withdrawing profits.
It insists on continuity—and prevents lucky one-time trades from avoiding tests.
Tip: Trade light on filler days if you’ve already hit your target.
Consistency Rules
Some firms require your biggest trading day not to be more than, say, 40% of your total profits. This stops traders from going all-in one day and coasting the rest of the month.
Tip: Spread your wins out—don’t put all your profit eggs in one basket.
Scaling Plans
You may not be able to trade the entire account size immediately. Scaling plans raise your permitted position size as you demonstrate persistent profitability.
Tip: Don't attempt to sneak larger trades early on. They will catch on.
Position Limits
This refers to how many contracts you can have open simultaneously. It prevents you from assuming too much risk.
Tip: Be sure to review the firm's rules on contract size for each instrument—they vary.
Restrictions on news trading
Some futures trading prop firms prohibit trading during major news events (such as Non-Farm Payrolls or FOMC).
Tip: If you're a news trader, this might be a showstopper—understand the rules before you join.
Overnight and Weekend Holds
You can't hold positions after market close or over the weekend at all firms. Don't forget or you might inadvertently break rules.
Tip: Remind yourself of market close times with alarms.
