Futures Prop Firm Basic Rules Guide (2025)
This guide breaks down everything from scratch: what prop firms are, drawdown rules, consistency, payouts, tools, and how to avoid simple violations.
Part 1: The Three Core Rules
Before researching any Futures Prop Firm, you must understand three core concepts. Over 50% of challenge failures are not due to trading skill, but to unfamiliarity with these rules: Drawdown, Consistency, and Flat at Close.
1. Drawdown Rule
Drawdown is the space the platform allows your equity to drop. There are four main types:
(1) EOD (End-of-Day) Drawdown
Only updates your high-water mark and drawdown line based on your closing balance after the market settles. You are safe even if you have large intraday floating losses, as long as you pull it back by the close.
- - Day 1 Close: $51,000 → New High: $51,000 → Drawdown Line: $49,000.
- - Day 2: Intraday low hits $49,200, but closes at $50,200 → You are safe (they check the close).
- - Any moment your equity drops below $49,000 → Challenge failed.
(2) TDD (Real-Time Trailing Drawdown)
This is the strictest type. It watches your account equity (including floating profits) in real-time. As you hit a new equity high, the drawdown line moves up immediately. If you touch the line (even with a floating loss), you fail.
- - Initial Line: $48,000.
- - You go long, equity hits $51,500 → Drawdown line immediately moves to $49,500.
- - Your equity then drops to $49,499 (even for a second) → Account is instantly blown.
⚠️ Impact: Not suitable for styles where you "hit a new high and then trade loosely." Hitting a high locks in your risk space.
(3) EOT (End-of-Trade) Drawdown
Only updates the high-water mark after you close a trade. Floating profits/losses do not trigger the trail. This is very rare (less than 1% of firms, e.g., Funded Futures Network) and can be mostly ignored.
(4) Static Drawdown
The max drawdown is a fixed number and never trails. As long as your balance stays above that line, you are safe. This is the most friendly rule.
Almost all firms convert your account to Static Drawdown after you pass and build a profit buffer (e.g., on a 50K account, after $2,100 in profit, the line locks at $50,100 forever).
2. Consistency Rule
This rule prevents "one lucky gamble" wins. Some firms require your profits to be spread out relatively evenly, avoiding a "one-shot" pass.
💡 Common Forms:
- Must have 3-5 profitable trading days (can't make all profit in 1 day).
- No single day's profit can exceed 30%-50% of the total profit target. If the target is $3,000 and the rule is 50%, your best day cannot exceed $1,500, otherwise, the profit target may be increased (e.g., to $6,000).
3. Flat at Close (Daily Close)
Futures prop firms are for day trading. You must close all positions before the specified time and cannot hold overnight.
- Common Time: Around 4:00 PM CT (check your firm's rules).
- 90% of Firms: Will automatically flatten your positions for you (this is safe and not a violation).
- 10% of Firms (e.g., TPT): Will NOT auto-close. If you forget to close (including pending orders), you fail instantly.
Part 2: Prop Firm Knowledge (A-Z)
1. What is Futures Prop Trading?
You pay an evaluation fee to prove your trading skill in a demo account. After you pass (hit profit targets, follow rules), the firm gives you a "Funded Account." You trade this account and split the profits (usually 80-90%). Your maximum risk is your evaluation fee.
2. Advantage vs. Personal Funds?
- Leverage: Use a small fee ($70-$200) to trade a large nominal account ($50K, $100K).
- Risk Cap: Your max loss is the fee. You can't blow up your personal capital.
- Psychology: Can be less emotional than trading "real money" (if treated professionally).
- 💡 Example: Losing 3 trades with $5,000 of your own money is stressful. Losing 3 evaluations might cost $450, but $5,000 could buy 50-70 evaluation accounts.
3. Who is Prop Trading For?
- Traders with a basic system who can control position size and drawdown.
- Traders with limited capital who want to scale up.
- Traders who are willing to read the rules patiently.
- ❌ Not For: People who "all-in," refuse to read rules, or blame the platform.
Platforms & Logistics
4. Which Platforms to Use?
Most firms offer these data feeds/front-ends:
- Project X: Web-based (PC/Mobile), good experience, easy copy trading. Recommended.
- Tradovate: Web & Desktop, easy to use, good connection.
- Rithmic: Old interface, often slow or disconnects, not recommended.
Strategy: When choosing a firm, prioritize those that support Project X, then Tradovate.
5. What Can You Trade (Futures vs. CFD)?
You trade major US futures contracts:
- Indices: NQ (Nasdaq), ES (S&P 500), YM (Dow)
- Metals: GC (Gold), SI (Silver)
- Energy: CL (Crude Oil)
- Micros: MNQ, MES, MGC (1/10th size).
vs. CFD: Futures are traded on a transparent exchange (CME), have fixed leverage, lower fees, and no "stop hunting" or price manipulation by the broker. They are generally considered fairer and more regulated.
6. How to Pay for Evaluations?
Most firms only accept international credit cards (VISA/Mastercard).
- Mainland China: Use a VISA/Mastercard bank card, PayPal, or firms that accept crypto (e.g., FundedNext, TopOne).
- International: Any VISA/Mastercard works.
7. How to Get Payouts?
Most firms pay out via:
- Wise (USD account)
- RISE (can withdraw via wire or crypto)
- Bank Wire / Crypto (Some firms)
8. How to Read English Websites?
Use browser translation tools: Chrome (Right-click > Translate), Edge (built-in), or the "Immersive Translate" plugin. But always double-check key rules (like drawdown) in the original English to avoid machine translation errors.
9. Can I Use a VPN?
Most firms allow it, but be smart:
- Do NOT use IPs from banned countries (e.g., North Korea).
- Do NOT jump IPs frequently (HK in the morning, US at noon). This triggers risk control. Use a stable line.
Common Rules & Terms
10. Max Drawdown Examples
This is just an example of how rules vary. (Note: TPT EOD is for Eval, TDD is for Funded accounts).
| Firm | Size | Drawdown Type | Max Drawdown | Daily Loss |
|---|---|---|---|---|
| TPT | 50K | EOD (Eval) / TDD (Funded) | $2,000 | $2,000 |
| Lucid | 50K | EOD | $2,000 | $1,200 |
| FundedNext | 50K | EOD | $2,000 | $2,000 |
11. Max Position Size
Firms limit your total contracts (e.g., 5 NQ on a 50K eval, but maybe only 1 NQ on a funded account). ⚠️ Project X won't let you violate this. Rithmic/Tradovate might let you, which will cause you to fail.
12. What is Daily Loss Limit (DLL)?
A few firms have a DLL. This is the max you can lose in one day. If you hit it, your positions are auto-liquidated, but it's a "soft" breach. You can continue trading the next day (as long as you didn't also hit your Max Drawdown).
13. What is the News Rule?
Some firms restrict trading around major news (NFP, CPI, FOMC) on funded accounts (eval accounts usually don't have this rule). This usually means you cannot open or close trades X minutes before/after the news.
14. Monthly Fee (Subscription) Model
Most evals are monthly subscriptions. You pay $X for 30 days. If you don't pass or fail, you must pay again or reset. Once you pass, the monthly fee stops. Some firms (Lucid, FundedNext) charge a one-time fee with no time limit.
15. What is an Activation Fee?
A fee some firms (like Topstep) charge after you pass the eval, to "activate" your funded account. Most firms (TPT, Lucid, FundedNext) do not have this fee. Always calculate your "Total Cost" (Eval + Reset + Activation).
Strategy & Payouts
16. What is Copy Trading?
Using software (like Project X's built-in copier) to copy trades from one "master" account to multiple "follower" accounts. All firms only allow you to copy YOUR OWN accounts. You cannot copy external signals.
17. What is the "Farming" Strategy?
A style focused on low-risk, consistent profits over the long term, rather than high-profit gambles. The logic: Multiple Accounts + Small Targets + High Survival Rate. For example, aiming for $200-$300 per day on each account and then stopping.
18. Max Funded Account Limit
All firms limit how many funded accounts you can have (e.g., Lucid limits to 5). Using family/friends' info to get more accounts requires perfect isolation (IP, device, payment) or you will be banned.
19. Payout Buffer & Static Drawdown
The "Buffer" (or "Profit Cushion") is profit you must keep in the account (e.g., $2,100). You can only withdraw profits above this buffer.
The Reward: Once you build this buffer (e.g., $2,100 profit on a 50K account), your drawdown locks to your initial balance (e.g., $50,100) and becomes Static. This is the best-case scenario.
20. What is KYC (Use a Passport!)
Know Your Customer. Firms require this before your first payout to verify your identity.
Use your Passport. Most firms prefer it. Your KYC name must match your registration name (use English Pinyin) and your payment name.
21. Payout Cap (Single Payout Limit)
Many firms limit the amount of your first few payouts (e.g., $1,500 for the first payout, $2,500 for the second). This is normal risk management.
22. Payout Locks Drawdown (Reminder)
As mentioned in #19, almost all firms state that after your first payout, your drawdown locks to your initial balance (becomes Static).
23. Why is my Dashboard Not Real-Time?
The firm's dashboard (showing your profit/loss) is always delayed.
Project X: A few minutes/hours.
Tradovate/Rithmic: Often one day (updates the next morning).
Conclusion: ALWAYS trust your trading platform's numbers, not the dashboard.
24. What is a "Live" Account?
There are 3 stages:
- Evaluation: Demo account.
- Sim Funded: You are getting paid profits from a demo account.
- Live: The firm (after you've been paid X times) may move you to a real-money CME account. (This is generally worse, as you may face stricter rules, so try to stay on Sim Funded).
25. How to Combine Accounts?
Our goal is to have many "farms." Start with one account. After your first payout, use those profits to expand to more accounts.