The rules of a challenge decide the outcome as much as the trading does. Their names are often the same from one firm to another; their definitions are not. For each rule below: the usual definition, the concrete effect, a possible trap and the question to ask the firm. Definitions vary: the only one that counts is the one in the terms of the firm you are considering.
Static and trailing drawdown
- Definition. The drawdown is the maximum allowed drop of the account. It is static when the loss threshold stays fixed; it is trailing when the threshold rises with the highest level the account has reached.
- Concrete effect. Illustrative example, invented values: a 10,000 account with a 1,000 drawdown. With a static drawdown, the threshold stays at 9,000. With a trailing one, if the account rises to 10,600, the threshold moves to 9,600; a drop to 9,700 then leaves 100 of room, although the trader is still above the starting capital.
- Possible trap. Confusing the two, or overlooking that the trailing threshold also rises with unrealized profits (open positions). The threshold may also stop rising at a given level: check it.
- Question to ask. Is the threshold fixed or trailing? What is it calculated on (balance, equity)? How high can it rise?
Daily loss and overall loss
- Definition. The maximum daily loss limits the loss over one day; the overall loss limits the cumulative loss since the account started. Both can coexist.
- Concrete effect. Breaching the daily limit can close the account even though the overall limit is not reached.
- Possible trap. The time the day resets, its time zone, and what the limit counts (realized losses only, or also open positions, fees and commissions).
- Question to ask. What time does the day start? Is the limit calculated on balance or equity? Do fees count?
End-of-day or intraday
- Definition. An end-of-day rule assesses the account at the close of the day; an intraday rule assesses it continuously, including unrealized results.
- Concrete effect. With intraday, a momentary unrealized loss can breach the limit even if the position later closes higher. With end-of-day, only the value at the measurement time counts.
- Possible trap. Assuming an "end-of-day" rule does not apply to positions during the day: a firm may combine an end-of-day measurement for the threshold with an intraday measurement for other limits.
- Question to ask. What is the measurement moment for each limit? Do unrealized results count?
Consistency rule
- Definition. The consistency rule limits the share that a single day, or a single trade, may represent in the total profit.
- Concrete effect. One big winning day can delay a payout or the validation of a phase, until other profits rebalance the distribution.
- Possible trap. Discovering the rule when requesting a payout, on a profit already made. The rule may apply to the evaluation, to the funded account, or to both.
- Question to ask. What is the exact formula? Over which period? What happens if it is not met: payout blocked, phase not validated, account closed?
Minimum trading days
- Definition. The minimum number of days on which the trader must have traded to validate a phase or request a payout.
- Concrete effect. The profit target is not enough: activity must also be spread over time.
- Possible trap. The definition of a "trading day": does a single trade suffice, is a minimum volume or profit required? How are days spanning midnight counted?
- Question to ask. What counts as a trading day?
Time limits
- Definition. The maximum time to reach the target of a phase. A firm may set none.
- Concrete effect. A deadline pushes toward larger positions near the end of the period, which raises the chance of breaching the drawdown.
- Possible trap. Confusing calendar days and trading days, or overlooking an inactivity delay that closes the account.
- Question to ask. Is there a time limit, in which units, and an inactivity limit?
News trading restrictions
- Definition. A rule that limits or prohibits trading around specified economic announcements.
- Concrete effect. A position opened or closed inside a prohibited window can cancel profits, block a payout or close the account.
- Possible trap. The window (before and after the announcement), the list of announcements concerned and the treatment of positions already open at the time of the announcement may differ from one firm to another; the rule may also differ between evaluation and funded account.
- Question to ask. Which announcements, which window, which penalty? Is a position opened before the window concerned?
Scaling
- Definition. The scaling plan changes the size of the funded account, or other parameters, according to criteria set by the firm.
- Concrete effect. The conditions to move to the next tier (profit, regularity, delay) determine whether the advertised increase is reachable.
- Possible trap. Confusing a "possible" tier with an earned one; overlooking that the rules of the next tier may be different.
- Question to ask. What exact criteria to move up a tier? Can you be moved back down? Do the risk rules change?
Profit split
- Definition. The profit split is the division of profits between the trader and the firm.
- Concrete effect. The amount received depends on the percentage, but also on the calculation base and any deductions.
- Possible trap. A percentage that changes with the tier, the duration or the number of payouts; fees deducted before the split; a "withdrawable" profit different from the displayed profit.
- Question to ask. What is the split calculated on? Does the percentage change? Which deductions apply?
Before you pay
Read the firm's terms line by line, note the answers to the questions above and archive the dated document. The selection guide integrates them into a checklist; the risk management guide shows how the limits translate into position size. Terms: glossary. General framework: risk warning.
The proproaster editorial team