A proprietary (“prop”) trading firm gives you a funded account to trade in exchange for a share of the profits. Most now run an evaluation — a paid challenge you must pass under strict rules before you get funded. The skill here is as much about managing the rules as reading the market. This lesson explains the model; it is not a recommendation to buy any evaluation.
How the funded model works
- You pay for an evaluation — a one-time or monthly fee for a simulated account with a target.
- You pass a challenge — hit a profit target without breaking the risk rules.
- You get “funded” — trade the firm’s capital (often still simulated) and keep a profit split, commonly 70–90%.
The firm makes money from evaluation fees and from traders who break the rules. Your edge is not blowing up on rule #1 below.
The rules that actually matter
| Rule | What it means |
|---|---|
| Profit target | The gain you must reach to pass (e.g. 8–10%). |
| Max daily loss | Lose more than this in one day and you fail — instantly. |
| Max overall drawdown | A floor your equity can never touch; sometimes trailing. |
| Consistency rule | No single day can be too large a share of total profit. |
| Min trading days | You can’t pass in one lucky trade; some require 5–10 days. |
A trailing max-drawdown moves up with your equity high-water mark, then locks. Many traders pass the target and then fail because the trailing floor caught a normal pullback. Always know whether your drawdown is static or trailing, and where the line currently sits.
Trading the evaluation
- Size to the daily-loss limit, not the target. Work out the max you can lose per trade so that a string of losers can’t hit the daily cap. Use the Position Size Calculator.
- One good day is not a strategy. Aim for small, repeatable gains across the minimum days — this also satisfies consistency rules.
- Stop when you’re up. Hitting a daily soft-target and walking away protects both the trailing drawdown and your psychology.
- Trade your normal plan. The evaluation is not the time to invent a new strategy; it rewards the discipline covered in Risk & Expectancy and Trading Psychology.
Is it worth it?
Funded accounts can be a low-personal-capital path to trading size — but the evaluation business is designed so most people fail and re-buy. Treat the fee as tuition you might not recover, only attempt one when your process is already consistent on your own account, and never fund an evaluation with money you can’t afford to lose.
This lesson explains how prop-firm evaluations work. It is not a recommendation to purchase any evaluation or trade any strategy. Evaluation fees are often non-refundable and most participants do not reach a payout. See our full risk disclaimer.