Complete Guide ยท 2026
Prop Firm Rules Explained
Everything you need to know about prop firm challenge rules. Understand max drawdown, daily loss limits, profit targets, minimum trading days, and how to pass with an EA.
Rules Overview
Key Prop Firm Rules Explained
These are the rules that determine whether you pass or fail a prop firm challenge. Understanding each one is critical to your success.
The maximum drawdown rule limits how much your account can fall from its highest balance (equity peak). This is the #1 reason traders fail challenges.
FTMO 5% max drawdown (10% after scaling plan)
FundedNext 6% max drawdown (12% after scaling)
Both Calculated from the highest account balance, not starting balance
Example: On a $100k FTMO challenge with 5% max drawdown, if your account reaches $105k, you cannot drop below $99,750 ($105k - 5%). This resets each time you reach a new equity peak.
The daily loss limit restricts how much you can lose in a single trading day (based on server time, usually midnight to midnight).
FTMO 2% of account balance per day
FundedNext 3% of account balance per day
Both Loss includes floating (unrealized) losses + closed losses
Important: If you hit the daily loss limit, you must stop trading for the day. The EA with our risk settings automatically respects this limit.
The profit target is the amount of profit you need to achieve to pass each challenge phase.
FTMO Phase 1 10% profit target
FTMO Phase 2 5% profit target
FundedNext 10% profit target (one phase) or 8%+5% (two phases)
Tip: Our EA typically achieves these targets in 2-3 weeks with consistent 2-3% weekly gains.
Minimum trading days ensure the firm that your profits are not from luck โ you must trade consistently over multiple days.
FTMO 4 calendar days per phase (at least one trade per day)
FundedNext 0 minimum trading days (can pass in one day)
After funded Most firms require trading at least once every 30 days to keep the account active
You have a limited time to complete each challenge phase before the challenge expires.
FTMO 30 days for Phase 1, 60 days for Phase 2
FundedNext No time limit (unlimited evaluation period)
EA advantage: Our EA trades 24/5, accumulating profit faster and comfortably staying within time limits.
Both firms prohibit certain trading strategies. Key restrictions include:
โ Allowed: Expert Advisors, scalping, swing trading, hedging (on MT5)
โ Prohibited: News trading within 2 minutes of releases, arbitrage, latency trading, tick scalping (opening/closing within 5 seconds)
Our EA is compliant โ it respects all these restrictions with built-in news filters and minimum trade duration settings.