Complete Prop Firm Trading Guide for Beginners (Step-by-Step)

This is one of my many payouts, but I’m not some trading-wizard. I have a few thousand in profit after costs, and I’m happy with that.

At their core, Prop firms are pretty simple:

1. Pass the evaluation

2. Become a funded trader

   • Keep ~90% of the profits

   • If you lose the account, you owe the firm nothing (they take the loss)

This page was designed to be a comprehensive guide, and it covers everything in chronological order:

• Step-by-step guide on passing evaluations and how to use firms the smart way

• All relevant trading rules and policies for evaluations and funded accounts

• All general topics and common questions

Prop firms are an incredible opportunity for experienced traders but a money pit for beginners. Read this guide closely.

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Prop-firm evaluation essentials (the process and rules)

To make this simple, we’ll use the 50k starter account from MyFundedFutures to explain the entire process and all relevant trading rules. It’s the easiest account to pass in the entire industry, so it’s an obvious choice. We’ll get into other accounts later. Use code Iman to automatically get the best discount and never miss a sale (thank you).

1. Purchase - After buying the 50k starter evaluation, you’re given a new trading account. The balance starts at 0, and it’s a simulation account.

2. Objectives - In the chart below or on the right (mobile vs computer), you’ll see that your profit target is $3,000 and the maximum loss limit (often called the “max drawdown”) is $2,500.

3. Check the rules - Since this account has no consistency or minimum trading day rule in the evaluation, you can technically pass the evaluation in 1 trade. It’s up to you on how aggressive you want to be though. The terms below will be discussed in-depth later on.

   • Consistency rule: a 50% consistency rule means that 1 single day’s profit can’t be over 50% of the total profit

   • Minimum trading day rule: just like it sounds, it’s the minimum amount of days you need to trade

   • Daily loss limit: if you lose $1,200 in a single day, you can’t trade until the next day (the account is not failed)

4. Passing - If you make $3,000 before losing $2,500, then you will become a funded trader. It’s really that simple. If you fail the account and want to try again, you can either buy a new account or pay a reset fee (which allows you to restart the current account).

5. Funded account - Passing means you’ll start on a new funded account. In order to withdraw the profits you make here, you must follow just two rules:

   • 40% consistency

   • At least 5 winning days (making at least $100 on those days - no, not in a row).

Parameters	Starter 50K
Profit Target	$3,000
Maximum Loss Limit	$2,500
Daily Loss Limit	$1,200
Price	$92
Reset	$92
Max Contracts	3 minis
Scaling	Yes
Consistency	40% (Funded only)
Qualification for Payouts	5 winning days of $100/ possibility of weekly payouts
Withdrawal Limit	Up to $1,200 for each payout until 30 winning days or $6,000 in payouts achieved. After the first payout, Maximum Loss Limit moves to $50,100

For those who don’t want a consistency rule once you’re funded, MyFundedFutures has 4 different accounts with completely different policies (2 of them don’t have a consistency rule once funded). For a full guide to see which account is best best for you, you can check out the guide I wrote below. Otherwise, there’s lots more to cover.

Crucial information for succeeding with prop firm trading

I recommend reading everything on this site if you are new to firms. I haven’t put anything here that isn’t necessary.

• The max drawdown and trailing-drawdown systems

  If the max drawdown is $2,500, then the account is failed the moment you lose $2,500. However, most firms use 1 of 2 types of drawdown systems that move up as your account grows, which are also referred to as trailing thresholds. No, they don’t follow you forever; they generally stop at the account’s starting balance.

  1. Intraday

     • An intraday trailing drawdown trails the account’s highest unrealized balance, so this includes trades that haven’t been closed yet. This is terrible.

  2. End-of-day (EOD)

     • An EOD drawdown is only calculated once the market has closed for the day. This is great.

  To easily understand this, let’s say it’s day 1 of a new evaluation on a 50k account with a $2,500 max drawdown. Your first trade is $1,000 into profit at one point, and you close it later for a $500 win. You only take that trade. So, your account balance would obviously go from $50,000 to $50,500.

  1. Intraday account

     • The minimum account balance would move up by $1,000, because that is $2,500 away from the highest unrealized account balance.

     • The max drawdown went from $47,500 to $48,500

  2. EOD account

     • The minimum account balance would move up by only $500, because that is $2,500 away from the account balance at the end of the trading day.

     • The max drawdown went from $47,500 to $48,000

  The drawdown systems differ in the time that they choose to calculate any adjustments. For intraday, it’s always active, whereas EOD is only calculated when the day is finished. For both, the max drawdown only moves up when the account balance hits a new high. So, if you lose money and then have profitable days after, the max drawdown won’t move until the account balance surpasses its previous highest value.

  If you are still confused, I made a dedicated Drawdown Guide with helpful visuals and more info.

• Rules: consistency, minimum trading days, news-events, and scaling plans

  Consistency Rule

  A 40% consistency rule means that one single day’s profit can’t be over 40% of the total profit. Here’s a simple demonstration to understand how it works:

  1. Day 1; +$300

  2. Day 2; +$500

  3. Day 3; +$200

  • Total profit = +$1,000

  • Biggest single day of profit = $500

  Right now, you are not meeting the 40% consistency rule because your biggest single day of profit ($500) is 50% of the total profit. In order to follow the 40% consistency rule, the account balance would need to increase until $500 equals 40% of the total profit. For the people like me who shut down when boring math starts, just pay attention to this; divide your biggest day of profit by .4 to determine the total profit needed. In this instance, that means the account balance needs to be $1,250 for you to request a payout. Of course, understanding this rule before you get funded means that you will be planning ahead. Don’t have a massive day of earnings if that’s not how you normally trade. Or, go with an account that has no consistency rule once funded, like the starter plus or expert plans with MyFundedFutures (full guide here).

  Minimum Trading days

  • It’s as simple as it sounds; it’s just the minimum amount of trading days required to either pass an evaluation or take a payout from a funded account. Firms differ on how they use this rule, and some don’t have it at all.

  News Events

  Use a free site like Forexfactory.com to be aware of when there are high-impact and scheduled news events. When this happens, your entire account could be wiped out in less than a second. That’s why all firms specify what their rules are for these events. Sometimes, the rules are different depending on which account you use.

  Scaling Rule

  The scaling rule is used in MyFundedFutures’ Starter and Starter Plus plans (but not their Expert plans). It means that you start your funded account without access to the same amount of contracts you could trade in the evaluation. As you grow/scale your account, you gain access to higher contract size. Again; as your account gets larger from profits, you can start trading with more contracts. This rule is used by many firms.

  https://www.imantrading.org/firmfaq/evaluations

• Trading strategy tips and prohibited practices

  Because of various rules and the max drawdown systems, trading with firms is not like a personal trading account. We’ll get more into that below, but this lack of understanding/realization is what messes up many traders.

  • Does the account you’re choosing have a consistency rule?

  • What type of drawdown is being used?

  • How many minimum trading days are required?

  ANALYZE THE RULES! Different accounts attract different kinds of approaches - low/high win rate, small/large trades, blah blah blah. Certain things work with firms that wouldn’t on a live account, but don’t gamble unless you’ve got some math on your side. All I’m saying is analyze the rules and what’s required to achieve funding. For slightly more information on that, go here - https://www.imantrading.org/firmfaq/trading-strategies

  Also, we’ll get more into the actual trading part and how to be smart about this further down in the guide.

• Prop firms vs personal accounts; advantages, differences, & important notes

  Prop firms will never offer the same freedom that a personal account does, but that’s not really their appeal:

  • Prop firm: pay $100 for a $2,500 trading account

    • Max amount you can lose: $100 (the cost of the evaluation)

  • Personal account: deposit $2,500 into a trading account

    • Max amount you can lose: $2,500 (or more than your initial deposit if you’re really talented)

  In this example of the total cost being $100 total (for MyFundedFutures, since other companies typically have $140 activation fees), you’ve essentially got 25 attempts to pass before you would’ve been better off depositing $2,500 into your own personal account. Then again, if you fail 25 times, then you probably weren’t ready, and at least you learned something in all of that time instead of losing that all with a live account on day 1. Failing 25 evaluations that have a max drawdown (and therefore true account size) of $2,500 means losing the equivalent of $62,500, lol. So, keep this math in mind. It’s important to be analytical. Yes, prop firms make money off of failed traders who start purchasing evaluations before they’re ready. I was a fool and started too early, but now I get payouts - the learning I did to get to where I am now could’ve been done on a sim account. Please do that. If prop firms getting most of their revenue from that is upsetting, then make sure you bring that same energy to the billion-dollar CFD space where you’re trading against your broker (where they make money if their traders fail).

Why do I personally trade through prop firms?

I started with a personal/live trading account with my own funds, and now I only trade with prop firms. That’s just my personal preference though, and here’s why:

1. LESS PRESSURE

   • It’s easier to trade meaningful size when the money being risked isn’t yours

2. MONEY AND RISK

   • Since the only costs from you are paying to take the evaluation, you can’t lose anything beyond that

3. CHEAP ACCESS TO MORE CAPITAL

   • Paying $92 total for a $2,500 trading account is an amazing opportunity

     • ^ As explained earlier, you have to actually get funded to benefit from this

Look, I’ve seen some insane returns from traders in the hundreds of thousands, but I’m not cut out for that level of risk. I thought I was, but I’m not. All it did was result in terrible sleep and anxiety-induced stomach aches... among other things. Prop firms allow me to cut that stress almost entirely out, because it’s not my actual money on the line. So, for me, the psychological side is the biggest benefit, and now I no longer have nightmares about trading (lol).

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There’s money to be made from prop firms… if you’re smart about it.

Analyze and think about the rules and parameters of an account in relation to those consistency and minimum trading day rules. No, seriously… really think about it.

During this WORK, you might make important observations like the following:

• Prop firms allow short-term edges to be exploited in a way that personal accounts wouldn’t due to the structure of how firms operate*

  • *meaning paying $100 for a $2,500 account and how that cost vs funding-capital gap creates an opportunity for funded-payouts to offset evaluation costs

• Prop firms are not the same as a personal account, so your plan should match the specifics of prop-trading environments

• Trading through prop firms should be treated like a business with evaluations as expenses and payouts as income

When it comes to your trading strategy and approach, there are a few possibilities:

• It works with firms but doesn’t work long-term on a personal account

• It works with firms and works on a personal account

• It doesn’t work with firms but does work on a personal account

• It doesn’t work on anything but that’s okay because you’re still learning on a free/cheap sim account like the responsible and smart person you are

So, how exactly are you going to get where you want to be?

All that matters is making money, and all I’m saying is to do some math and modeling to figure out what’s required to achieve that. If you go into this without an actual trading model and plan, you’re just going to lose money. Don’t be that person. Depending on what you do, prop firms will either be more difficult or easier than a personal trading account, and it’s up to you to determine why that is (and how to take advantage of it). Again, there is money to be made here. I’m not expanding further on that, but this brief section is the direction you need to be pointed towards to beat firms. The work is now up to you, which most people aren’t willing to do. As usual with my website and everything that I do on YouTube, I can only point you in the right direction. I’ve seen people with hundreds of thousands in profit from firms (after costs), and I’ve seen people who have spent thousands without any payouts. The failure and success rate is probably no different with firms than it is with personal trading accounts.

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FAQ - Billing, Setup, Taxes, General

• All billing-related questions for evaluations AND funded accounts (activation fees, what happens after passing, etc.)

  With rare exceptions (like Purdia’s instant funding which is a one-time purchase), evaluation purchases are a monthly subscription. The examples below will use MyFundedFutures, which is one of the last companies that doesn’t have activation fees (like Topstep’s $149 fee if you pass the evaluation). Also, there is no time limit on passing an evaluation.

  1. You purchase an evaluation on the 10th of the month:

     • If you pass before the 10th of the next month, you will pay nothing more and that passed evaluation is over

     • If you’re still trading the account by the 10th of the next month, you get billed again on that date

  2. If you fail the account

     1. You can pay a fee to reset it and try again

     2. You can wait until the 10th of the next month, because it will be reset for “free” when you get billed again

  You have to cancel the account if you don’t want it to be renewed on the next month (if you passed the evaluation, there will be no more charges on that account though). There is no subscription or payment for funded traders. After you pass an evaluation, you are then put on a new funded account.

• Market data, trading platforms, logins and setup, and tradable instruments

  Trading platform

  You will pick which platform you’d like to trade through during the checkout process of buying an evaluation. The available trading software to pick from will be visible during this, but you can also check their website to see what they have for options. The firm will give you all necessary instructions for logging in (they’ll give you the username and password details). It might take some time for the login information to work, since the account has to be created for you. However, from my experience, it typically only takes a couple minutes.

  Market data

  As for market data, this is included in the price of the evaluation. However, if you want level 2 market data, then this is usually an add-on that you’ll need to pay for. If you end up reaching a live account through the firm, you’ll legally become a “professional” trader, and you’ll be required to pay professional market data rates.

  “Funded sim” and what’s next

  When you become a funded trader, you’re almost always put on what’s called a “funded-sim account”. You start on a simulation account, and then you’ll be put on a live account if you do well. Yes, you can get payouts during the funded-sim stage. The path to a live account is extremely clear at the reputable firms like MyFundedFutures. They’ll tell you exactly how much money you can make before being transferred to a live account.

  Futures instrument list

  As for what you can trade through futures firms, it typically includes all of the major and popular exchanges - CME, COMEX, CBOT, and NYMEX. But, make sure to confirm that with the firm you’re looking at.

• Taxes taxes taxes...

  Legally, I’m not allowed to give advice, but I’m familiar with how this all works and can cover general information for most situations.

  Unless otherwise stated, you’re not employed by the prop firm when you’re trading. You’re a sole proprietor, and you’ll get a 1099-NEC tax form of your payouts at the end of the year.

  MOST OF THE TIME, your income from firms is treated as self-employment income, and you are responsible for paying taxes on it. Depending on how much you make and your situation, you might need to do quarterly estimated tax payments if your income is substantial. This might not apply to you, so consult with a tax professional to be sure you

  Trading through prop firms loses the benefit of 60/40 tax treatment on futures gains. In a personal account, 60% of gains from futures trading are taxed at the long-term capital gains rate. That saves money if you’re making large returns. The other 40% is taxed at the short-term capital gains rate (whichever income bracket you’re in). This doesn’t make a huge difference until you start making a substantial amount. So, keep that in mind.

• WHAT COUNTRY DO YOU LIVE IN

  Futures prop firms in the US are bound by regulations to not allow traders from certain countries to join. They do not personally make the decision on which countries to allow. Please check the firm’s website/FAQ to see if they support your country. Do not try to use a VPN to bypass these rules.

Clicking the image is Iman’s link to MyFundedFutures’ website

What are the best prop firm companies and the best trading accounts?

I trade, so I pick the firm that’s easiest for funding and getting payouts (MyFundedFutures). If that ever changes, I will too. Be sure to check out the full guide first, because there’s 4 different trading accounts to choose from. You need to understand the policy differences so you can choose what works best for you. I also have a dedicated “best prop firms” page comparing multiple firms.

Which trading account is best; 50k, 100k, or 150k?

Smaller accounts are easier to pass than larger accounts because of something called the drawdown to profit target ratio. For example, Topstep’s 50k account has a max drawdown of $2,000 and a profit target of $3,000. That ratio is 2:3. Their 150k account has a max drawdown of $4,500 and a profit target of $9,000. That ratio is 2:4. Personally, I like the smaller accounts because they’re the most fair, but it’s up to you on what to choose.

How do you know when you’re ready to start using prop firms?

The one cRaZy trick that prop firm owners don’t want you to kNoW! I passed FoUr evaluations in OnE wEeK!

Practice evaluations and the entire process on a free sim account with your model. When you “pass” an account, then pretend that it’s a funded account. This crucial part of designing and preparing your approach can be done for free. However, some people will purchase an evaluation account because it also gives you access to a free sim account (so it’s basically a pricey sim account with 1 try per month at an evaluation). Remember what we talked about in the previous sections about your trading model and what’s required to beat prop firms. Check below for some other resources, and best of luck to you.

RISK AND AFFILIATE DISCLOSURE - Never risk money you can’t afford to lose!

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Most traders do not succeed. The links on this site are primarily affiliate links, which financially supports me at no extra cost to you. I partnered with multiple firms, because I don’t see 1 firm that has it all. Not being exclusive to one firm also helps to reduce bias, because I’m partnering with the firms that I think are the best.