A prop firm challenge asks you to reach a profit target without breaking a set of loss limits. An expert advisor can suit that, because it follows its rules on bad days, but it can also break a limit within minutes if its settings ignore how the firm measures losses. Rules differ between firms and change over time, so read your own firm's terms first.
Daily and maximum drawdown limits
Most challenges have a daily limit and a maximum limit, and many measure both on equity, so an open trade's loss counts the moment it appears. These examples use a $100,000 account with a 5% daily limit and a 10% maximum limit.
| Rule | Where the floor sits | What moves it |
|---|---|---|
| Daily | The day's starting balance or equity, minus $5,000 | Resets at the firm's stated time |
| Static maximum | $90,000 | Nothing |
| Trailing on balance | The highest closed balance, minus $10,000 | New balance highs |
| Trailing on equity | The highest equity reached, minus $10,000 | Open profit, even if it is given back |
Under a trailing equity rule, a trade that reaches +$4,000 and then closes at breakeven lifts the floor to $94,000, so the room left falls from $10,000 to $6,000. Some trailing floors stop rising once they reach the starting balance.
News, weekend and consistency rules
- News. Some firms bar opening or closing trades within a few minutes of major releases. A stop or target filling in that window can count, so open trades matter as well as new ones.
- Weekends. Some accounts must be flat before the Friday close, when spreads widen.
- Consistency. Some firms cap the share of total profit that may come from one day. Under a 30% rule (an example figure), a best day of $3,000 means total profit must reach $3,000 ÷ 0.30 = $10,000 before you can pass, even if the target is $8,000.
Copy trading and EA restrictions
Firms differ most on automation. In general terms, look for:
- Whether EAs are allowed at each stage, challenge and funded.
- Bans on strategy types such as tick scalping, latency arbitrage, grid and martingale systems, and hedging across accounts.
- Limits on trade copiers, including copying between your own accounts.
- Limits on widely sold third-party EAs, because many accounts placing identical trades concentrate the firm's risk.
- Minimum holding times that rule out very short trades.
Ask support in writing about anything unclear, and keep the reply.
Sizing an EA for the daily limit
Work backward from the daily limit, not forward from the target. On the $100,000 account the limit is $5,000, and at 0.5% risk each losing trade costs $500.
- Say the EA's worst test day, measured on equity, had five losing trades: 5 × $500 = $2,500, half the limit.
- Allowing 20% for slippage and spread gives $3,000, which still leaves $2,000 of room.
- At 1% risk the same day costs $5,000, the whole limit, so any slippage or open loss fails the account.
Then turn the $500 into lots from the stop. On EURUSD, a 25-pip stop costs $250 per lot at $10 a pip, so the size is 2.00 lots. On gold, a $5 stop is 50 moves of 10 cents, or $500 per lot, so the size is 1.00 lot. The position size calculator does this for any symbol. The $10,000 maximum limit covers 20 losses in a row at $500, fewer once a trailing floor has risen.
Settings to change
| Setting | What to set | Why |
|---|---|---|
| Risk per trade | A fixed amount, such as 0.5% of the starting balance | A trailing floor's room doesn't grow with profit, so risk shouldn't either. |
| Daily equity stop | Inside the limit, such as 4% ($4,000), reset at the firm's time | An EA's own daily loss input may count closed trades only. |
| Maximum open trades | A number whose stops together fit the day's room | Several trades can hit their stops at once. |
| News filter | The firm's events and window, in server time | It must cover trades already open. |
| Friday close | Well before the market shuts | Spreads widen and gaps can jump past stops. |
| Grid or recovery features | Off, unless the firm allows them | They grow positions while losing. See our grid and recovery page. |
A pre-challenge test plan
- Backtest on real ticks with the challenge server's spreads and commission, over several years. See how to backtest an EA.
- Record the bad numbers: the worst day by equity, the longest losing run and the deepest equity drawdown.
- Replay the rules day by day, including the daily floor, any trailing floor and the consistency rule.
- Estimate the odds of reaching the maximum limit with the risk of ruin calculator.
- Run it on demo with the same settings for two to four weeks, on a VPS so it never sleeps, and compare spreads, slippage and trade count with the backtest.
Checks before running one
- Read the rules and save a dated copy. Our prop firm rules guide lists what to look for.
- Confirm the EA is allowed, and its strategy type, at every stage.
- Check symbol specifications on the challenge server with the pip value calculator.
- Size each trade from its stop with the position size calculator.
- Test the equity stop and confirm it fires inside the daily limit.
- Measure a losing run against the limits with the drawdown calculator.
These steps can't make a pass certain, but they remove the failures caused by settings rather than by the strategy.