Prop firms: how a challenge works and where accounts get lost
A prop firm lets you trade on its account after an evaluation, which is usually paid. Here's how it works, why many fail it and what to look at before paying.
How it works
A trader pays for an attempt (a challenge) and trades an evaluation account under the firm's rules. Meet the conditions and you get a funded account and a share of the profit. Break a rule and the attempt is over, and the fee usually isn't refunded.
There are usually one or two stages, typically checking a profit target and loss limits.
The main rules
| Rule | What it means | Why it's dangerous |
|---|---|---|
| Daily loss limit | How much you can lose in a day | It runs on the firm's day, not your clock |
| Overall drawdown | A limit from the starting balance or the peak | A trailing drawdown follows the balance |
| Stage target | How much profit you need | It pushes you toward risk near the deadline |
| Minimum days | How many days you must trade | One lucky trade won't pass |
| News and overnight | Limits on trading around events | A breach can void the attempt |
Terms vary between firms and change. Read the firm's own rules before paying.
Where accounts get lost
- Big size to pass quickly. The target looks close, and one trade uses up the daily limit.
- Open losses. At many firms the limit includes the floating loss, not only closed trades.
- Fees. They eat profit and bring the limit closer, especially with frequent trading.
- Revenge after a drawdown. See the article on trading psychology.
- Not knowing the firm's day. Its new day may not start when yours does.
What to check before paying
- Whether the firm accepts traders from your country.
- How drawdown is calculated: from balance or peak, with or without the floating loss.
- Which instruments are allowed and what restrictions apply.
- How and when profit is paid out.
- What one attempt really costs and what happens if you fail.
A simple plan
First calculate your risk per trade from the limit, not from the wish to pass quickly. With a 5% daily limit, 2% risk per trade means only two or three mistakes. This doesn't guarantee a pass, but it leaves room for an ordinary losing streak. More in the article on risk management.
The MAMAY Prop Hub has a directory of firms for Russia and the CIS, and it calculates the daily limit and drawdown by the firm's day.
FAQ
Are prop firms legitimate?
They vary. Check the terms, reviews, payouts and country of registration. The attempt fee is real money at risk, even if the account is called an "evaluation".
Can a beginner pass a challenge?
The odds are low: the rules demand discipline over many trades. It's better to first build consistent rules on a DEMO account.
What is a daily loss limit?
The amount you can lose in one of the firm's trading days. Going over it usually ends the attempt immediately.