A proprietary trading firm, or prop firm, gives traders access to its capital in exchange for a share of the profit. Most retail-facing prop firms work through an evaluation (often called a challenge): you pay a fee, trade a demo or simulated account under strict rules, and if you reach the profit target without breaking a limit you receive a funded account.

The usual rules

The numbers vary by firm and account size; these are typical shapes, not any firm's terms.

Rule Typical form
Profit target 6% to 10% of the starting balance in phase one
Daily loss limit 4% to 5% of the starting balance or of the day's starting equity
Maximum loss 8% to 10%, static or trailing
Minimum trading days often 3 to 5
Consistency rule the best day may not exceed a share of total profit
Profit split 70% to 90% to the trader once funded

Why most evaluations fail

Not because the trader has no edge, but because the rules punish variance. A strategy with a normal 8% drawdown cannot survive a 5% maximum loss at 2% risk per trade. The two decisions that matter most are made before the first trade:

  1. Size for the limits. Work out how many full losses the daily limit and the maximum loss allow, and pick a risk that survives your worst historical streak.
  2. Know exactly how each limit is measured. Balance or equity, closed trades or open positions, reset at midnight or at 17:00 New York time. Read the firm's terms; they differ.

What to journal on a prop account

Everything you journal elsewhere, plus the distance to each limit before every trade. A trade that would break the daily limit if it hits the stop should not be taken, however good it looks.

In SetupBook

Create the account with the type Prop and enter the daily loss limit, the maximum drawdown and the profit target. The dashboard shows a "Prop limits" card with how much of each limit is used, a warning appears once 80% of a limit is used, and the trade form warns when the risk you are about to take is larger than what is left. SetupBook measures limits on closed trades; it does not see your broker's floating equity, so keep a margin for open positions.