Prop firm rules, in plain English

The conditions a prop firm places on an account, any one of which can close it regardless of whether you are profitable overall. The main ones are the daily loss cap, the total loss cap, the per-trade risk cap and the consistency rule. They are different from a profit target: the target says what it takes to pass, the rules say how you fail.

A cap on how much of your total profit a single day may account for. With a 30% cap, if you have made $10,000 in profit, no one day may have produced more than $3,000 of it. The point is to stop someone passing a challenge on one oversized trade. Breaking it usually delays a payout rather than closing the account, until your profit is spread more evenly.

A static limit is measured from your starting balance and never moves: on a $100,000 account with a 10% cap, the breach line sits at $90,000 forever. A trailing limit starts in the same place but follows your highest balance up — reach $110,000 and the breach line rises to $100,000. That means a profitable account can still be closed by giving back gains it never paid out, which is why the model usually matters more than the percentage.

A hard limit on how much any single trade may lose, usually as a percentage of your balance immediately before that trade. With a 2% cap on a $100,000 balance, no trade may lose more than $2,000. Breaching it can fail the account even when your daily and total drawdown are both comfortable — which is what makes it the easiest of these rules to overlook.

Drawdown, by a distance — it is the only one of these that fires without you doing anything wrong, since the market only has to move against you. A consistency rule or a per-trade cap usually delays a payout or invalidates a trade; a drawdown breach closes the account. That is why the tools in this section start there.